Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/56138
Authors: 
Benninga, Simon
Björk, Tomas
Wiener, Zvi
Year of Publication: 
2001
Series/Report no.: 
SSE/EFI Working Paper Series in Economics and Finance 484
Abstract: 
In this paper we discuss the significant computational simplification that occurs when option pricing is approached through the change of numeraire technique. The original impetus was a recently published paper (Hoang, Powell, Shi 1999) on endowment options; in the present paper we extend these results to the case of stochastic interest rates. We also discuss four additional option pricing problems within the framework of a change of numeraire: 1. Pricing savings plans which incorporate a choice of linkage. 2. Pricing convertible bonds. 3. Pricing employee stock ownership plans 4. Pricing options where the strike price is in a currency different from the stock price.
Subjects: 
Numeraire
option
convertible bond
JEL: 
G12
G13
Document Type: 
Working Paper

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