A variational approach for pricing options and corporate bonds
We 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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Volume (Year): 9 (1997)
Issue (Month): 3 ()
|Note:||Received: February 2, 1995; Revised version May 14, 1996|
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