Griebsch, Susanne; Kühn, Christoph; Wystup, Uwe Installment options; a closed-form solution and the limiting case. (English) Zbl 1153.91500 Sarychev, Andrey (ed.) et al., Mathematical control theory and finance. Proceedings of the workshop, Lisbon, April 10–14, 2007. Berlin: Springer (ISBN 978-3-540-69531-8/hbk). 211-229 (2008). Summary: In Foreign Exchange Markets Compound options (options on options) are traded frequently. Installment options generalize the concept of Compound options as they allow the holder to prolong a Vanilla Call or Put option by paying installments of a discrete payment plan. We derive a closed-form solution to the value of such an option in the Black-Scholes model and prove that the limiting case of an installment option with a continuous payment plan is equivalent to a portfolio consisting of a European Vanilla option and an American Put on this Vanilla option with a time-dependent strike.For the entire collection see [Zbl 1143.91005]. Cited in 5 Documents MSC: 91G10 Portfolio theory PDFBibTeX XMLCite \textit{S. Griebsch} et al., in: Mathematical control theory and finance. Proceedings of the workshop, Lisbon, April 10--14, 2007. Berlin: Springer. 211--229 (2008; Zbl 1153.91500) Full Text: DOI