ArticleOriginal scientific text
Title
On option pricing in the multidimensional Cox-Ross-Rubinstein model
Authors 1, 2
Affiliations
- Institute of Applied Mathematics and Mechanics, Warsaw University, Banacha 2, 02-097 Warszawa, Poland
- Institute of Mathematics, Polish Academy of Sciences, Śniadeckich 8, 00-950 Warszawa, Poland
Abstract
Option pricing in the multidimensional case, i.e. when the contingent claim paid at maturity depends on a number of risky assets, is considered. It is assumed that the prices of the risky assets are in discrete time subject to binomial disturbances. Two approaches to option pricing are studied: geometric and analytic. A numerical example is also given.
Keywords
contingent claim, self-financing strategies, super-hedging, option pricing
Bibliography
- J. C. Cox, S. A. Ross and M. Rubinstein, Option pricing: A simplified approach, J. Financial Econom. 7 (1979), 229-263
- I. Karatzas and S. E. Shreve, Brownian Motion and Stochastic Calculus, Springer, New York, 1991.
- A. N. Shiryaev, Yu. M. Kabanov, D. O. Kramkov and A. V. Melnikov, On the theory of pricing of European and American options. I. Discrete time, Teor. Veroyatnost. i Primenen. 39 (1994), 23-79 (in Russian).
- G. Tessitore and J. Zabczyk, Pricing options for multinomial models, Bull. Polish Acad. Sci. Math. 44 (1996), 363-380.
Pages:
55-72
Main language of publication
English
Received
1996-12-02
Accepted
1997-05-23
Published
1998
Exact and natural sciences