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Bounds on baskets option prices
Includes bibliographical references (leaves 70-71).
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| Format: | Thesis |
| Language: | English |
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Department of Mathematics and Applied Mathematics
2014
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| _version_ | 1867613335139123200 |
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| access_status_str | Open Access |
| author | De Swardt, N C |
| author2 | Polakow, Daniel |
| author_browse | De Swardt, N C Polakow, Daniel |
| author_facet | Polakow, Daniel De Swardt, N C |
| author_sort | De Swardt, N C |
| collection | Thesis |
| description | Includes bibliographical references (leaves 70-71). |
| format | Thesis |
| id | oai:open.uct.ac.za:11427/4880 |
| institution | University of Cape Town (South Africa) |
| language | eng |
| last_indexed | 2026-06-10T12:34:28.941Z |
| license_str | Not specified — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from UCTD — University of Cape Town Open Access Repository |
| publishDate | 2014 |
| publishDateRange | 2014 |
| publishDateSort | 2014 |
| publisher | Department of Mathematics and Applied Mathematics |
| publisherStr | Department of Mathematics and Applied Mathematics |
| record_format | dspace |
| source_str | UCTD — University of Cape Town Open Access Repository |
| spelling | oai:open.uct.ac.za:11427/4880 Bounds on baskets option prices De Swardt, N C Polakow, Daniel Financial Mathematics Includes bibliographical references (leaves 70-71). The celebrated Black-Scholes option pricing model is unable to produce closed-form solutions for arithmetic basket options. This problem stems from the lack of an analitical form for the distribution of a sum of lognormal random variables. lVlarket participants commonly price basket options by assuming the basket follows lognormal dynamics, although it is known that this approximation performs poorly in some cicumstances. The problem of finding an analytical approximation to the sum of lognormally distributed random variables has been widely studied. In this dissertation we seek to draw these studies together and apply them in an option pricing setting. We propose some new option pricing formulae based on these approximations. In order to examine the utility of these new formulae and compare them to commonly used market approximations we present rigorous analytical bounds for the price of arithmetic basket options using the theory of comonotonicity. In this we follow the ideas in Deelstra et al. [7]. Additionally we provide an interval of hedge parameters (the Greeks). We carry out a numerical sensitivity analysis and identify circumstances under which the market approximation misprices basket options. 2014-07-31T08:07:02Z 2014-07-31T08:07:02Z 2005 Master Thesis Masters MSc http://hdl.handle.net/11427/4880 eng application/pdf Department of Mathematics and Applied Mathematics Faculty of Science University of Cape Town |
| spellingShingle | Financial Mathematics De Swardt, N C Bounds on baskets option prices |
| thesis_degree_str | Master's |
| title | Bounds on baskets option prices |
| title_full | Bounds on baskets option prices |
| title_fullStr | Bounds on baskets option prices |
| title_full_unstemmed | Bounds on baskets option prices |
| title_short | Bounds on baskets option prices |
| title_sort | bounds on baskets option prices |
| topic | Financial Mathematics |
| url | http://hdl.handle.net/11427/4880 |
| work_keys_str_mv | AT deswardtnc boundsonbasketsoptionprices |