IDEAS home Printed from https://ideas.repec.org/a/taf/apmtfi/v6y1999i4p275-292.html
   My bibliography  Save this article

Various passport options and their valuation

Author

Listed:
  • Hyungsok Ahn
  • Antony Penaud
  • Paul Wilmott

Abstract

The passport option is a call option on the balance of a trading account. The option holder retains the gain from trading, while the writer is liable for the loss. Multi-asset passport options and passport options with discrete constraints are studied. For the first ones the pricing equations are Hamilton-Jacobi-Bellman equations. For those with discrete constraints, a linear complementary problem must be solved in order to price the option. The gain by selling passport options to utility maximizing investors and to investors who guess the market a certain percentage of the time is also examined.

Suggested Citation

  • Hyungsok Ahn & Antony Penaud & Paul Wilmott, 1999. "Various passport options and their valuation," Applied Mathematical Finance, Taylor & Francis Journals, vol. 6(4), pages 275-292.
    • Handle: RePEc:taf:apmtfi:v:6:y:1999:i:4:p:275-292
    DOI: 10.1080/13504869950079293
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/13504869950079293
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/13504869950079293?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Leland, Hayne E, 1980. "Who Should Buy Portfolio Insurance?," Journal of Finance, American Finance Association, vol. 35(2), pages 581-594, May.
    2. Steven E. Shreve & Jan Vecer, 2000. "Options on a traded account: Vacation calls, vacation puts and passport options," Finance and Stochastics, Springer, vol. 4(3), pages 255-274.
    3. Harrison, J. Michael & Pliska, Stanley R., 1981. "Martingales and stochastic integrals in the theory of continuous trading," Stochastic Processes and their Applications, Elsevier, vol. 11(3), pages 215-260, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Josef Teichmann & Hanna Wutte, 2023. "Machine Learning-powered Pricing of the Multidimensional Passport Option," Papers 2307.14887, arXiv.org.
    2. G. Dorfleitner & J. Gerer, 2020. "Time consistent pricing of options with embedded decisions," Review of Derivatives Research, Springer, vol. 23(1), pages 85-119, April.
    3. Vicky Henderson & David Hobson, 2001. "Passport options with stochastic volatility," Applied Mathematical Finance, Taylor & Francis Journals, vol. 8(2), pages 97-118.
    4. Peter Buchen & Hamish Malloch, 2014. "CLA's, PLA's and a new method for pricing general passport options," Quantitative Finance, Taylor & Francis Journals, vol. 14(7), pages 1201-1209, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Boyle, Phelim & Tian, Weidong, 2008. "The design of equity-indexed annuities," Insurance: Mathematics and Economics, Elsevier, vol. 43(3), pages 303-315, December.
    2. N. Naguez & J. L. Prigent, 2017. "Optimal portfolio positioning within generalized Johnson distributions," Quantitative Finance, Taylor & Francis Journals, vol. 17(7), pages 1037-1055, July.
    3. Jacques Pézier & Johanna Scheller, 2011. "A Comprehensive Evaluation of Portfolio Insurance Strategies," ICMA Centre Discussion Papers in Finance icma-dp2011-15, Henley Business School, University of Reading.
    4. Mark Broadie & Jerome B. Detemple, 2004. "ANNIVERSARY ARTICLE: Option Pricing: Valuation Models and Applications," Management Science, INFORMS, vol. 50(9), pages 1145-1177, September.
    5. Pézier, Jacques & Scheller, Johanna, 2013. "Best portfolio insurance for long-term investment strategies in realistic conditions," Insurance: Mathematics and Economics, Elsevier, vol. 52(2), pages 263-274.
    6. Alan Beggs, 2021. "Afriat and arbitrage," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 9(2), pages 167-176, October.
    7. Jean-Yves Datey & Genevieve Gauthier & Jean-Guy Simonato, 2003. "The Performance of Analytical Approximations for the Computation of Asian Quanto-Basket Option Prices," Multinational Finance Journal, Multinational Finance Journal, vol. 7(1-2), pages 55-82, March-Jun.
    8. Marcelo F. Perillo, 2021. "Valuación de Títulos de Deuda Indexados al Comportamiento de un Índice Accionario: Un Modelo sin Riesgo de Crédito," CEMA Working Papers: Serie Documentos de Trabajo. 784, Universidad del CEMA.
    9. Chris Kenyon & Andrew Green, 2015. "Self-Financing Trading and the Ito-Doeblin Lemma," Papers 1501.02750, arXiv.org.
    10. Damir Filipovi'c & Martin Larsson, 2017. "Polynomial Jump-Diffusion Models," Papers 1711.08043, arXiv.org, revised Jul 2019.
    11. Kimmel, Robert L., 2004. "Modeling the term structure of interest rates: A new approach," Journal of Financial Economics, Elsevier, vol. 72(1), pages 143-183, April.
    12. Enrico Biffis & Beniamin Goldys & Cecilia Prosdocimi & Margherita Zanella, 2015. "A pricing formula for delayed claims: Appreciating the past to value the future," Papers 1505.04914, arXiv.org, revised Jul 2022.
    13. Christian Gourieroux & Jean Paul Laurent & Huyên Pham, 1998. "Mean‐Variance Hedging and Numéraire," Mathematical Finance, Wiley Blackwell, vol. 8(3), pages 179-200, July.
    14. Yeap, Claudia & Kwok, Simon S. & Choy, S. T. Boris, 2016. "A Flexible Generalised Hyperbolic Option Pricing Model and its Special Cases," Working Papers 2016-14, University of Sydney, School of Economics.
    15. Bjork, Tomas, 2009. "Arbitrage Theory in Continuous Time," OUP Catalogue, Oxford University Press, edition 3, number 9780199574742, Decembrie.
    16. Karl Friedrich Mina & Gerald H. L. Cheang & Carl Chiarella, 2015. "Approximate Hedging Of Options Under Jump-Diffusion Processes," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 18(04), pages 1-26.
    17. Anlong Li, 1992. "Binomial approximation in financial models: computational simplicity and convergence," Working Papers (Old Series) 9201, Federal Reserve Bank of Cleveland.
    18. Timothy Johnson, 2015. "Reciprocity as a Foundation of Financial Economics," Journal of Business Ethics, Springer, vol. 131(1), pages 43-67, September.
    19. Bertrand, Philippe & Prigent, Jean-luc, 2016. "Equilibrium of financial derivative markets under portfolio insurance constraints," Economic Modelling, Elsevier, vol. 52(PA), pages 278-291.
    20. Ivan Peñaloza & Pablo Padilla, 2022. "A Pricing Method in a Constrained Market with Differential Informational Frameworks," Computational Economics, Springer;Society for Computational Economics, vol. 60(3), pages 1055-1100, October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:apmtfi:v:6:y:1999:i:4:p:275-292. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAMF20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.