Computations of complex options

A. Bensoussan*, M. Crouhy, D. Galai

*Corresponding author for this work

Research output: Contribution to journalConference articlepeer-review

Abstract

In view of the so well acceptance by practitioners of the Black-Scholes model it is important to investigate the possible extensions of the theory and its value as an approximation for computations in non standard situations. Besides, this field is typically a source of adaptive identification of parameters, namely the 'volatility'. Our purpose in this presentation is to study the valuation of complex options, to establish the necessary extensions, with respect to the BSM and to investigate the applicability of the BSM as an approximation. We study the volatility behaviour in important practical cases, like the valuation of warrants in equity or levered firms. Sharp and applicable approximations are given. Also, we solve completely the European option case in a large class of non constant volatility and give explicit formulas, which never appeared in the literature before, and constitute a useful extension of the BSM. They are applied to the case of levered firms, with warrants and debts.

Original languageEnglish
Pages (from-to)2798-2801
Number of pages4
JournalProceedings of the IEEE Conference on Decision and Control
Volume3
StatePublished - 1994
Externally publishedYes
EventProceedings of the 2nd IEEE International Symposium on Requirements Engineering - York, Engl
Duration: 27 Mar 199529 Mar 1995

Fingerprint

Dive into the research topics of 'Computations of complex options'. Together they form a unique fingerprint.

Cite this