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Performance Differences Within the Market for Housing

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Author Info
Garry de Jager
Joseph Winsen
Abstract

An increasing number of securities and corporate cashflows have been identified partly or wholly as options with the familiar pieswise linear payoff function. And it has been recognised non-linear payoffs can in principle be approximated by a portfolio of (piecewise linear) options. This paper considers the valuation of nonlinear payoffs directly by defining a "curved option" payoff, illustrating the approach for a European call option on a non-dividend paying stock and highlighting the advantages for traders in running a book of such options.

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File URL: http://www.business.uts.edu.au/finance/research/wpapers/wp19.pdf
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Publisher Info
Paper provided by School of Finance and Economics, University of Technology, Sydney in its series Working Paper Series with number 19.

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Length: 26 pages
Date of creation: 01 Jul 1992
Date of revision:
Handle: RePEc:uts:wpaper:19

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  1. Black, Fischer, 1976. "The pricing of commodity contracts," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 167-179. [Downloadable!] (restricted)
  2. Kemna, A. G. Z. & Vorst, A. C. F., 1990. "A pricing method for options based on average asset values," Journal of Banking & Finance, Elsevier, vol. 14(1), pages 113-129, March. [Downloadable!] (restricted)
  3. Brennan, Michael J & Schwartz, Eduardo S, 1985. "Evaluating Natural Resource Investments," Journal of Business, University of Chicago Press, vol. 58(2), pages 135-57, April. [Downloadable!] (restricted)
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