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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/27251
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| Title: | Multivariate Binomial Approximations for Asset Prices with
Non-Stationary Variance and Covariance Characteristics |
| Authors: | Ho, Teng-Suan
Stapleton, Richard C.
Subrahmanyam, Marti G. |
| Issue Date: | 1994 |
| Series/Report no.: | FIN-94-036 |
| Abstract: | In this paper, we suggest an efficient method of approximating a
general, multivariate lognormal distribution by a multivariate binomial
process. There are two important features of such multivariate
distributions. First, the state variables may have volatilities that
change over time. Second, the two or more relevant state variables
involved may covary with each other in a specified manner, with a
time-varying covariance structure. We discuss the asymptotic properties
of the resulting processes and show how the methodology can be used to
value a complex, multiple-exercisable option whose payoff depends on the
prices of two assets. |
| URI: | http://hdl.handle.net/2451/27251 |
| Appears in Collections: | Finance Working Papers
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