A variational approach for pricing options and corporate bonds
AbstractWe show that option prices can always be obtained as the values of simple optimization problems. This easy remark has two consequences: sensitivity analysis is simplified (by applying the envelope theorem) and numerical procedures are improved. We give two examples of applications: options on coupon bonds and corporate bonds.
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Bibliographic InfoArticle provided by Springer in its journal Economic Theory.
Volume (Year): 9 (1997)
Issue (Month): 3 ()
Note: Received: February 2, 1995; Revised version May 14, 1996
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Find related papers by JEL classification:
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
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