Closed form spread option valuation

被引:46
作者
Bjerksund, Petter [1 ]
Stensland, Gunnar [1 ]
机构
[1] NHH, Dept Finance, N-5045 Bergen, Norway
关键词
Finance; Financial applications; Financial derivatives; Financial engineering; Financial mathematics; Financial modelling; Financial options;
D O I
10.1080/14697688.2011.617775
中图分类号
F8 [财政、金融];
学科分类号
0202 ;
摘要
This paper considers the valuation of a spread call when asset prices are log-normal. The implicit strategy of the Kirk formula is to exercise if the price of the long asset exceeds a given power function of the price of the short asset. We derive a formula for the spread call value, conditional on following this feasible, but non-optimal, exercise strategy. Numerical investigations indicate that the lower bound produced by our formula is extremely accurate. The precision is much greater than the Kirk formula. Moreover, optimizing with respect to the strategy parameters (which corresponds to the Carmona-Durrleman procedure) yields only a marginal improvement of accuracy (if any).
引用
收藏
页码:1785 / 1794
页数:10
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