Numerical Evaluation of Multivariate Contingent Claims
- 1 April 1989
- journal article
- research article
- Published by Oxford University Press (OUP) in The Review of Financial Studies
- Vol. 2 (2) , 241-250
- https://doi.org/10.1093/rfs/2.2.241
Abstract
We develop a numerical approximation method for valuing multivariate contingent claims. The approach is based on an n-dimensional extension of the lattice binomial method. Closed-form solutions for the jump probabilities and the jump amplitudes are obtained. The accuracy of the method is illustrated in the case of European options when there are three underlying assets.Keywords
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