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)


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

image (9.70)



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