Publication
Title
The influence of a stochastic interest rate on the n-fold compound option
Author
Abstract
We reintroduced the idea of an n-fold compound option as a generalization of Geskes (2- fold) compound option in the same framework of constant interest rates. For the valuation of long-term financial agreements (life insurance products) this assumption is not always realistic. So that the stochastic modelling of the interest rates might be a better approach. According to Miltersen et al., we will use the requirement of simple interest rates over a fixed finite period to be log-normal distributed, instead of the continuously compounded interest rates. With these assumptions, closed-form solutions are determined for the n-fold compound call options written on zero-coupon bonds.
Language
English
Source (series)
Research paper / Faculty of Applied Economics ; 2003:10
Publication
Antwerpen : UA, 2003
Volume/pages
15 p.
Full text (open access)
UAntwerpen
Faculty/Department
Research group
Publication type
Affiliation
Publications with a UAntwerp address
External links
Record
Identification
Creation 08.10.2008
Last edited 23.12.2015
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