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Worst Case Pricing of Rainbow Options

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  • Topper, Jürgen
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    Abstract

    Options on two underlyings are a common exotic product in the equity and FX derivatives market. The value of these kinds of options depends on the correlation of the two underlyings. We will present a model to compute a lower bound for the price of this option. The model, represented by a non-linear parabolic PDE, is implemented with finite elements in order to demonstrate the results with several derivatives from the European market.

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    File URL: http://diskussionspapiere.wiwi.uni-hannover.de/pdf_bib/dp-217.pdf
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    Bibliographic Info

    Paper provided by Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Hannover Economic Papers (HEP) with number dp-217.

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    Length: 12 pages
    Date of creation: Oct 2001
    Date of revision:
    Handle: RePEc:han:dpaper:dp-217

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    Cited by:
    1. N. Hilber & N. Reich & C. Schwab & C. Winter, 2009. "Numerical methods for Lévy processes," Finance and Stochastics, Springer, vol. 13(4), pages 471-500, September.

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