Valuation Of Compound Option When The Underlying Asset Is Non-Tradable
After Geske (1979), compound options — options on options — have been employed in many fields in which real options are applied. The formula for a compound option is convenient to use in real project investment, but it has one drawback — the assets that underlie the compound options are usually non-tradable. This article addresses this issue and proposes two new compound option pricing formulae to overcome this drawback.
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Volume (Year): 13 (2010)
Issue (Month): 03 ()
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