O'Reilly logo

Principles of Financial Engineering, 3rd Edition by Salih N. Neftci, Robert Kosowski

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

image (9.68)

But, this is equal to the payoff of a put with strike price Ker(TT0)image and exercise date T0. Thus, the pricing formula for the chooser option is given by

Ch(t)=[StN(d1)Ker(Tt)N(d2)]+[StN(d¯1)+Ker(TT0)er(T0t)N(d¯2)] (9.69)

image (9.69)

Simplifying:

Ch(t)=[St(N(d1)N(d¯1))]+Ker(Tt)(N(d¯2)N(d2)) (9.70)

image (9.70)

with

d1,2=ln(St

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required