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An Algorithm for Computing Values of Options on the Maximum or Minimum of Several Assets

Phelim P. Boyle and Y. K. Tse
The Journal of Financial and Quantitative Analysis
Vol. 25, No. 2 (Jun., 1990), pp. 215-227
DOI: 10.2307/2330825
Stable URL: http://www.jstor.org/stable/2330825
Page Count: 13
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
An Algorithm for Computing Values of Options on the Maximum or Minimum of Several Assets
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Abstract

An approximate method is developed for computing the values of European options on the maximum or the minimum of several assets. The method is very fast and is accurate for parameter ranges that are often of the most interest. The approach casts the problem in terms of order statistics and can be used to handle situations where the initial asset prices, the asset variances, and the covariances are all unequal. Numerical values are given to illustrate the accuracy of the method.

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