Lecture 8 Supplementary Part 2

Lecture 8 Supplementary Part 2

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Unformatted text preview: pound Op'ons Textbook pp 453‐457: •  The idea of porbolio replica'on is very useful, especially when trying to price a more complex product. It turns out that the compound op'on can be used to price an American Op'on on dividend paying stocks (If we have the price of the Compound Op'on, then pricing the American Op'on by looking at a replica'ng porbolio would be less 'me consuming than construc'ng a binomial tree through brute force). With this in mind, try out the following example. 3/31/12 4 2. Exo'c Op'ons Supplementary Slide 5 A Taxonomy of Exo'c Op'ons –...
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This note was uploaded on 10/31/2013 for the course SEEM 5840 taught by Professor Doctorw during the Fall '12 term at CUHK.

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