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Numerical evaluation of multivariate contingent claims |
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| Authors: | Boyle PP; Evnine J; Gibbs S |
| Institution: | 1 University of California, Berkeley, USA and University of Waterloo, Waterloo, Ontario, N2L 3G1, Canada 2 Wells Fargo Investment Advisers 3 University of Waterloo, Waterloo, Ontario, Canada |
| Abstract: | We develop a numerical approximation method for valuing multivariatecontingent claims. The approach is based on an n-dimensionalextension of the lattice binomial method. Closed-form solutionsfor the jump probabilities and the jump amplitudes are obtained.The accuracy of the method is illustrated in the case of Europeanoptions when there are three underlying assets. |
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