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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
Published by: Cambridge University Press on behalf of the University of Washington School of Business Administration
Stable URL: http://www.jstor.org/stable/2330825
Page Count: 13
You can always find the topics here!Topics: Prices, Call options, Approximate values, Strike prices, Interest rates, Approximation, Options contracts, Correlation coefficients, Quantitative analysis, Futures contracts
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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.
The Journal of Financial and Quantitative Analysis © 1990 University of Washington School of Business Administration