On Cox-Ross-Rubinstein Pricing Formula for Pricing Compound Option

Hussain, Javed; Khan, Bareerah

doi:10.28924/2291-8639-18-2020-129

Research Article

On Cox-Ross-Rubinstein Pricing Formula for Pricing Compound Option

Javed Hussain¹*
Bareerah Khan

Sukkur IBA University Pakistan; University of York UK

* Corresponding author

Abstract

The fundamental objective of this paper is twofold. Firstly, to derive the Cox-Ross-Rubinstein type new formula for risk neutral pricing of European compound call option, where the underlying asset is also a European call option. Thirdly, to prove that our newly derived CRR risk neutral pricing formula for compound call option, converges in distribution to the well known, continuous time Black-Scholes formula for pricing the compound call option on call.

How to Cite

J. Hussain, B. Khan, On Cox-Ross-Rubinstein Pricing Formula for Pricing Compound Option, Int. J. Anal. Appl. 18 (2020), 129–148. https://doi.org/10.28924/2291-8639-18-2020-129

BibTeX

@article{Hussain2020,
  author  = {Hussain, Javed and Khan, Bareerah},
  title   = {On Cox-Ross-Rubinstein Pricing Formula for Pricing Compound Option},
  journal = {Int. J. Anal. Appl.},
  volume  = {18},
  year    = {2020},
  pages   = {129--148},
  doi     = {10.28924/2291-8639-18-2020-129}
}

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