Bounds for the Price of an American Option on Several Assets: Index and Spread Options

Courant Institute Working Paper

74 Pages Posted: 2 Feb 2001

See all articles by Peter M. Laurence

Peter M. Laurence

Sapienza University of Rome - Department of Mathematics; Courant Institute, NYU

Date Written: December 20, 2000

Abstract

Using the method of symmetrization we compare the price of an American option on an index or spread to the solution of a parabolic variational inequality in one spatial variable. The comparison is made for a class of diffusion operators with time and state dependent coefficients and might be of particular value when only partial information is available about the volatilities, correlations and drifts of the various underlying assets.

JEL Classification: C0, G12

Suggested Citation

Laurence, Peter M., Bounds for the Price of an American Option on Several Assets: Index and Spread Options (December 20, 2000). Courant Institute Working Paper, Available at SSRN: https://ssrn.com/abstract=255361 or http://dx.doi.org/10.2139/ssrn.255361

Peter M. Laurence (Contact Author)

Sapienza University of Rome - Department of Mathematics ( email )

Roma, I-00185
Italy

Courant Institute, NYU ( email )

Division of Quantitative Finance 251 Mercer Street
New York, NY 10012
United States
212 9983000 (Phone)
212 9954121 (Fax)

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