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dc.contributor.authorBjerksund, Petter
dc.contributor.authorStensland, Gunnar
dc.date.accessioned2007-06-21T12:55:04Z
dc.date.available2007-06-21T12:55:04Z
dc.date.issued2006-10
dc.identifier.issn1500-4066
dc.identifier.urihttp://hdl.handle.net/11250/164107
dc.description.abstractThis paper considers the valuation of a spread call when asset prices are lognormal. The implicit strategy of the Kirk formula is to exercise if the price of the long asset exceeds a given power function of the price of the short asset. We derive a formula for the spread call value, conditional on following this feasible but non-optimal exercise strategy. Numerical investigations indicate that the lower bound produced by our formula is extremely accurate. The precision is much higher than the Kirk formula. Moreover, optimizing with respect to the strategy parameters (which corresponds to the Carmona-Durrleman procedure) yields only a marginal improvement of accuracy (if any).en
dc.language.isoengen
dc.publisherNorwegian School of Economics and Business Administration. Department of Finance and Management Scienceen
dc.relation.ispartofseriesDiscussion paperen
dc.relation.ispartofseries2006:20en
dc.subjectspread optionen
dc.subjectclosed formen
dc.subjectvaluation formulaen
dc.subjectlognormal asset pricesen
dc.titleClosed form spread option valuationen
dc.typeWorking paperen
dc.subject.nsiVDP::Samfunnsvitenskap: 200::Økonomi: 210en


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