A compound option is simply an option on an option. In this short paper, by using a martingale technique, we obtain an analytical formula for pricing compound European call options. Numerical results are given to expl...A compound option is simply an option on an option. In this short paper, by using a martingale technique, we obtain an analytical formula for pricing compound European call options. Numerical results are given to explain some economic phenomenon.展开更多
基金The research is supported by the research grant RG081/04-05S/JXQ/FST from University of Macauthe grant 050/2005/A from FDCT
文摘A compound option is simply an option on an option. In this short paper, by using a martingale technique, we obtain an analytical formula for pricing compound European call options. Numerical results are given to explain some economic phenomenon.
