Resource title

Installment options and static hedging

Resource image

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Resource description

An installment option is a European option in which the premium, instead of being paid up-front, is paid in a series of installments. If all installments are paid the holder receives the exercise value, but the holder has the right to terminate payments on any payment date, in which case the option lapses with no further payments on either side. We discuss pricing and risk management for these options, in particular the use of static hedges to obtain both no-arbitrage pricing bounds and very effective hedging strategies with almost no vega risk. (author's abstract) ; Series: Report Series SFB "Adaptive Information Systems and Modelling in Economics and Management Science"

Resource author

Mark Davis, Walter Schachermayer, Robert G. Tompkins

Resource publisher

Resource publish date

Resource language

en

Resource content type

application/pdf

Resource resource URL

http://epub.wu.ac.at/1584/1/document.pdf

Resource license

Adapt according to the license agreement. Always reference the original source and author.