Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/40180
Authors: 
Griebsch, Susanne
Kühn, Christoph
Wystup, Uwe
Year of Publication: 
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

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