Multinomial Approximating Models for Options with k State Variables

Authors

Bardia Kamrad
Peter H. Ritchken

Document Type

Report

Publication Date

9-20-1989

Abstract

Contingent claims whose values depend on multiple sources of uncertainty arise in many financial contracts and in the analysis of real projects. Unfortunately closed form solutions for these options are rare and numerical methods can be computationally expensive. This article extends the literature on multinomial approximating models. Specifically, new multinomial models are presented, that include as special cases existing models. The more general models are shown to be computationally more efficient.

Keywords

Operations research, Financial engineering, Numerical analysis, Mathematical optimization, Computational complexity, Risk assessment--Mathematical models

Publication Title

Technical Memorandums from the Department of Operations, School of Management, Case Western Reserve University

Issue

Technical memorandum no. 673

Rights

This work is in the public domain and may be freely downloaded for personal or academic use

Recommended Citation

Kamrad, Bardia and Ritchken, Peter H., "Multinomial Approximating Models for Options with k State Variables" (1989). Research Reports from the Department of Operations. 326.
https://commons.case.edu/wsom-ops-reports/326