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CPQF Working Paper Series, Frankfurt School of Finance and Management >
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http://hdl.handle.net/10419/40180
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| Title: | | Instalment options: a closed-form solution and the limiting case  |
| Authors: | | Griebsch, Susanne Kühn, Christoph Wystup, Uwe |
| Issue Date: | | 2007 |
| Series/Report no.: | | CPQF Working Paper Series 5 |
| Abstract: | | In Foreign Exchange Markets Compound options (options on options) are traded frequently. Instalment options generalize the concept of Compound options as they allow the holder to prolong a Vanilla Call or Put option by paying instalments of a discrete payment plan. We derive a closed-form solution to the value of such an option in the Black-Scholes model and prove that the limiting case of an Instalment option with a continuous payment plan is equivalent to a portfolio consisting of a European Vanilla option and an American Put on this Vanilla option with a time-dependent strike. |
| Subjects: | | exotic options |
| JEL: | | C15 G12 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CPQF Working Paper Series, Frankfurt School of Finance and Management
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