Pricing Product Options and Using Them to Complete Markets for Functions of Two Underlying Asset Prices

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dc.contributor.authorMadan, Dilip B.
dc.contributor.authorWang, King
dc.date.accessioned2023-10-30T18:26:53Z
dc.date.available2023-10-30T18:26:53Z
dc.date.issued2021-08-04
dc.description.abstractOptions paying the product of put and/or call option payouts at different strikes on two underlying assets are observed to synthesize joint densities and replicate differentiable functions of two underlying asset prices. The pricing of such options is undertaken from three perspectives. The first perspective uses a geometric two-dimensional Brownian motion model. The second inverts two-dimensional characteristic functions. The third uses a bootstrapped physical measure to propose a risk charge minimizing hedge using options on the two underlying assets. The options are priced at the cost of the hedge plus the risk charge.
dc.description.urihttps://doi.org/10.3390/jrfm14080355
dc.identifierhttps://doi.org/10.13016/dspace/iajo-6bhg
dc.identifier.citationMadan, D.B.; Wang, K. Pricing Product Options and Using Them to Complete Markets for Functions of Two Underlying Asset Prices. J. Risk Financial Manag. 2021, 14, 355.
dc.identifier.urihttp://hdl.handle.net/1903/31200
dc.language.isoen_US
dc.publisherMDPI
dc.relation.isAvailableAtRobert H. Smith School of Businessen_us
dc.relation.isAvailableAtLogistics, Business & Public Policyen_us
dc.relation.isAvailableAtDigital Repository at the University of Marylanden_us
dc.relation.isAvailableAtUniversity of Maryland (College Park, MD)en_us
dc.subjectmultivariate bilateral gamma
dc.subjectfast Fourier transform
dc.subjectdistorted expectations
dc.subjectacceptable risks
dc.titlePricing Product Options and Using Them to Complete Markets for Functions of Two Underlying Asset Prices
dc.typeArticle
local.equitableAccessSubmissionNo

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