The Multivariate binomial model and its application to the valuation of employee share options and other multivariate contingent claims

Research output: Contribution to conferenceAbstract

Abstract

This talk discusses a multivariate extension of the well known the binomial option pricing method, and shows how it may be applied to the valuation of employee share options (ESOs) and multi-asset, multi-period contingent claims. Most of the more complex ESOs are of this type. Recently developed analytical methods permit the derivation of analytic formulae for the valuation of multi asset, multi period options and contingent claims. These usually involve the multivariate Gaussian distribution. However these formulae don’t apply when the contingent claim has early exercise features. The multivariate binomial method however can handle these types of problems. Several numerical examples are given to demonstrate the applicability of the method for contingent claims valuation. This numerical method is easy to program and practical, at least for low dimensional problems.
Original languageEnglish
Publication statusPublished - 2011
EventStatistical Concepts and Methods for the Modern World - Colombo, Sri Lanka
Duration: 28 Dec 201130 Dec 2011

Conference

ConferenceStatistical Concepts and Methods for the Modern World
CityColombo, Sri Lanka
Period28/12/1130/12/11

Fingerprint Dive into the research topics of 'The Multivariate binomial model and its application to the valuation of employee share options and other multivariate contingent claims'. Together they form a unique fingerprint.

  • Cite this

    Kyng, T. (2011). The Multivariate binomial model and its application to the valuation of employee share options and other multivariate contingent claims. Abstract from Statistical Concepts and Methods for the Modern World, Colombo, Sri Lanka, .