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- Title
VALUATION OF COMPOUND OPTION WHEN THE UNDERLYING ASSET IS NON-TRADABLE.
- Authors
LIU, YU-HONG
- Abstract
After Geske (1979), compound options — options on options — have been employed in many fields in which real options are applied. The formula for a compound option is convenient to use in real project investment, but it has one drawback — the assets that underlie the compound options are usually non-tradable. This article addresses this issue and proposes two new compound option pricing formulae to overcome this drawback.
- Subjects
REAL options (Finance); VALUATION; INVESTMENTS; MONEY market; DERIVATIVE securities
- Publication
International Journal of Theoretical & Applied Finance, 2010, Vol 13, Issue 3, p441
- ISSN
0219-0249
- Publication type
Article
- DOI
10.1142/S021902491000584X