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Pricing a Class of American and European Path Dependent Securities


  • Jimmy E. Hilliard

    (University of Georgia, Department of Banking and Finance, Athens, Georgia 30602)

  • James B. Kau

    (University of Georgia, Department of INSLS/RE, Athens, Georgia 30602)

  • Donald C. Keenan

    (University of Georgia, Department of Economics, Athens, Georgia 30602)

  • Walter J. Muller, III

    (The NationsBank, Atlanta, Georgia 30303)


Path dependent securities depend on current and past values of underlying state variables. Consequently, the usual backward evaluation technique is difficult to apply since state variable values existing earlier in real time are unknown. This paper develops a series of propositions which makes possible the pricing of a certain class of both American and European versions of these path dependent securities.

Suggested Citation

  • Jimmy E. Hilliard & James B. Kau & Donald C. Keenan & Walter J. Muller, III, 1995. "Pricing a Class of American and European Path Dependent Securities," Management Science, INFORMS, vol. 41(12), pages 1892-1899, December.
  • Handle: RePEc:inm:ormnsc:v:41:y:1995:i:12:p:1892-1899
    DOI: 10.1287/mnsc.41.12.1892

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    derivatives; path dependent; swap; valuation;


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