An alternative derivation of the
compound option's formula using the martingale Approach
The lifetime
compound option provides benefit increases of five percent on each anniversary of the insured's coverage.
From a theoretical point of view, a
compound option with several maturities should be taken into account.
The
compound option pricing formula proposed by [39] can precisely evaluate the
compound option.
For our study, we examine two possible options:
compound option and deferment option.
First, the MRG and the RCP agreements are numerically combined and modeled as repeatedly-exercisable
compound option, MRC (MRG-RCP) option, which can be decomposed to the call and put options along with the appropriate financial and mathematical process.
Contingent on the evolution of prices, the project could be halted at each phase, so it can be considered a
compound option. When viewed this way, its value was positive, and the company started with the design phase.
The contributions of this paper are the following: Based on an analysis of the changes in the stock price process induced by warrants issuance, we show how standard options on stocks can be valued in this case as a portfolio of standard and
compound options. Specifically, we apply Geske's
compound option pricing formula to derive a closed-form solution for standard call can put option prices after warrants issuance within the Black-scholes model.
"Many players have bought a
compound option under which they have to sell the dollar if it dips below 108.30 yen and buy above 110.50 yen, and thereby were trying to prevent it from hitting these points," he said.
Thus the growth staircase is a
compound option. At each stage, it is not clear that an acquisition will provide the anticipated growth platform.
When P < [P.sup.*], the value of the
compound option over next interval is: