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Sensitivity of mountain range options prices

Author

Listed:
  • Krzysztof Echaust
  • Marcin Bartkowiak

Abstract

Mountain range options are a particular class of multi-asset options for which no closed form formula for valuation exists and Monte Carlo simulation should be used. In this paper, we conducted an analysis of the sensitivity of mountain range options prices to changes in various risk factors, such as correlation coefficients, underlying prices, volatilities, risk-free rate, and time to expiration. We found numbers of non-typical and nonlinear dependencies in options valuation.

Suggested Citation

  • Krzysztof Echaust & Marcin Bartkowiak, 2016. "Sensitivity of mountain range options prices," International Journal of Bonds and Derivatives, Inderscience Enterprises Ltd, vol. 2(2), pages 87-107.
    • Handle: RePEc:ids:ijbder:v:2:y:2016:i:2:p:87-107
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