Stock Options as Barrier Contingent Claims
This paper contributes in two ways. First it extends the Geske (1979) compound option pricing model to the case where the underlying call is a down-and-out claim. Second it provides an internally consistent frame-work for valuing options on general corporate securities. Numerical results suggest that the detailed characteristics of the underlying capital structure (such as coupons, principal and maturities) may substantially influence the pricing of options.
|Date of creation:||Nov 1996|
|Date of revision:||01 Feb 2002|
|Publication status:||Published in Applied Mathematical Finance, 2003, pages 121-147.|
|Contact details of provider:|| Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden|
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