On Cox-Ross-Rubinstein Pricing Formula for Pricing Compound Option
The fundamental objective of this paper is twofold. Firstly, to derive the Cox-Ross-Rubinstein type new formula for risk neutral pricing of European compound call option, where the underlying asset is also a European call option. Thirdly, to prove that our newly derived CRR risk neutral pricing form...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
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Etamaths Publishing
2020-01-01
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| Series: | International Journal of Analysis and Applications |
| Online Access: | http://etamaths.com/index.php/ijaa/article/view/2026 |
| Summary: | The fundamental objective of this paper is twofold. Firstly, to derive the Cox-Ross-Rubinstein type new formula for risk neutral pricing of European compound call option, where the underlying asset is also a European call option. Thirdly, to prove that our newly derived CRR risk neutral pricing formula for compound call option, converges in distribution to the well known, continuous time Black-Scholes formula for pricing the compound call option on call. |
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| ISSN: | 2291-8639 |