A Variational Approach for Pricing Options and Corporate Bonds

A Variational Approach for Pricing Options and Corporate Bonds

We show that option prices can always be obtained as the values of simple optimization problems. This easy remark has two consequences: sensitivity analysis is simplified (by applying the envelope theorem) and numerical procedures are improved. We give two examples of applications: options on coupon...

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Veröffentlicht in:Economic theory 1997-01, Vol.9 (3), p.557-569
Hauptverfasser: Décamps, Jean-Paul, Rochet, Jean-Charles
Format: Artikel
Sprache:eng
Schlagworte:
Bankruptcy
Bonds
Business structures
Call options
Capital
Corporate bonds
Corporatism
Coupon bonds
Coupons
Economic uncertainty
Exposita Notes
Financial securities
Pricing
Sensitivity analysis
Strike prices
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Beschreibung
Zusammenfassung:We show that option prices can always be obtained as the values of simple optimization problems. This easy remark has two consequences: sensitivity analysis is simplified (by applying the envelope theorem) and numerical procedures are improved. We give two examples of applications: options on coupon bonds and corporate bonds.
ISSN:0938-2259
1432-0479
DOI:10.1007/BF01213856