AN EFFICIENT BINOMIAL TREE METHOD FOR CLIQUET OPTIONSAN EFFICIENT BINOMIAL TREE METHOD FOR CLIQUET OPTIONS
- Other Titles
- AN EFFICIENT BINOMIAL TREE METHOD FOR CLIQUET OPTIONS
- Authors
- 문경숙; 김홍중
- Issue Date
- 2011
- Publisher
- 한국산업응용수학회
- Keywords
- binomial tree method; option pricing; cliquet options
- Citation
- Journal of the Korean Society for Industrial and Applied Mathematics, v.15, no.2, pp.83 - 96
- Indexed
- KCI
- Journal Title
- Journal of the Korean Society for Industrial and Applied Mathematics
- Volume
- 15
- Number
- 2
- Start Page
- 83
- End Page
- 96
- URI
- https://scholar.korea.ac.kr/handle/2021.sw.korea/114095
- ISSN
- 1226-9433
- Abstract
- This work proposes a binomial method for pricing the cliquet options, which provide a guaranteed minimum annual return. The proposed binomial tree algorithm simplifies the standard binomial approach, which is problematic for cliquet options in the computational point of view, or other recent methods, which may be of intricate algorithm or require pre- or post-processing computations. Our method is simple, efficient and reliable in a Black-Scholes framework with constant interest rates and volatilities.
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