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  can precisely evaluate the compound option
Therefore, the option to invest in the cogeneration project is conditional to the expansion option of the original sugar-ethanol project being exercised, creating a compound option
problem, which requires both options to be valued simultaneously.
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: