Valuation of compound option when the underlying asset is non-tradable

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1 Citation (Scopus)

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.

Original languageEnglish
Pages (from-to)441-458
Number of pages18
JournalInternational Journal of Theoretical and Applied Finance
Volume13
Issue number3
DOIs
Publication statusPublished - 2010 May 1

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics, Econometrics and Finance(all)

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