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
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: 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
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