This paper focuses on the problem of pricing the cliquet options which provide a guaranteed minimum annual return. The tree method which we propose simplifies the standard binomial Cox–Ross–Rubinstein approach which, in this context, is problematic from a computational point of view. Our technique provides very efficient and reliable evaluations in a Black-Scholes framework with piecewise constant interest rates and volatilities.
Pricing cliquet options by tree methods
GAUDENZI, Marcellino;ZANETTE, Antonino
2011-01-01
Abstract
This paper focuses on the problem of pricing the cliquet options which provide a guaranteed minimum annual return. The tree method which we propose simplifies the standard binomial Cox–Ross–Rubinstein approach which, in this context, is problematic from a computational point of view. Our technique provides very efficient and reliable evaluations in a Black-Scholes framework with piecewise constant interest rates and volatilities.File in questo prodotto:
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