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

Research output: Contribution to conferenceAbstractResearch

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.

Conference

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

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Binomial model
Contingent claims
Employees
Assets
Option pricing
Numerical methods
Analytical methods
Contingent claims valuation
Early exercise

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, .
Kyng, Tim. / 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, .
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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.",
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year = "2011",
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note = "Statistical Concepts and Methods for the Modern World ; Conference date: 28-12-2011 Through 30-12-2011",

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Kyng, T 2011, 'The Multivariate binomial model and its application to the valuation of employee share options and other multivariate contingent claims' Statistical Concepts and Methods for the Modern World, Colombo, Sri Lanka, 28/12/11 - 30/12/11, .

The Multivariate binomial model and its application to the valuation of employee share options and other multivariate contingent claims. / Kyng, Tim.

2011. Abstract from Statistical Concepts and Methods for the Modern World, Colombo, Sri Lanka, .

Research output: Contribution to conferenceAbstractResearch

TY - CONF

T1 - The Multivariate binomial model and its application to the valuation of employee share options and other multivariate contingent claims

AU - Kyng, Tim

PY - 2011

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N2 - 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.

AB - 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.

M3 - Abstract

ER -

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