Pricing Onion Options: A Probabilistic Approach

Upmann T (2013)
International Journal of Financial Research 4(4).

Zeitschriftenaufsatz | Veröffentlicht | Englisch
 
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Abstract / Bemerkung
As argued by Ebenfeld, Mayr and Topper (2002), Onion options may be decomposed into one-touch double barrier binary options (ODBs). Using this idea, these authors provide an arbitrage-free pricing formula for Onion options within the Black-Scholes framework. Their approach rests upon solving the underlying partial differential equation. In this paper, we take an alternative and more direct route: Based on a probabilistic approach, we compute the risk-neutral valuation formula for an ODB. Then, by inverting the decomposition of an Onion option, we are able to derive an alternative pricing formula for this type of an option.
Erscheinungsjahr
2013
Zeitschriftentitel
International Journal of Financial Research
Band
4
Ausgabe
4
ISSN
1923-4023
eISSN
1923-4031
Page URI
https://pub.uni-bielefeld.de/record/2958447

Zitieren

Upmann T. Pricing Onion Options: A Probabilistic Approach. International Journal of Financial Research. 2013;4(4).
Upmann, T. (2013). Pricing Onion Options: A Probabilistic Approach. International Journal of Financial Research, 4(4). https://doi.org/10.5430/ijfr.v4n4p11
Upmann, T. (2013). Pricing Onion Options: A Probabilistic Approach. International Journal of Financial Research 4.
Upmann, T., 2013. Pricing Onion Options: A Probabilistic Approach. International Journal of Financial Research, 4(4).
T. Upmann, “Pricing Onion Options: A Probabilistic Approach”, International Journal of Financial Research, vol. 4, 2013.
Upmann, T.: Pricing Onion Options: A Probabilistic Approach. International Journal of Financial Research. 4, (2013).
Upmann, Thorsten. “Pricing Onion Options: A Probabilistic Approach”. International Journal of Financial Research 4.4 (2013).

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