A Reduction Method Applicable to Compound Option Formulas

Curnow and Dunnett (Curnow, R. N., C. W. Dunnett. 1962. The numerical evaluation of certain multivariate normal integrals. Ann. Math. Statist. 33 571--579.) derive a reduction formula for multivariate normal integrals with a certain type of correlation matrix. This paper presents a more general reduction formula which can reduce substantially the computational cost of high dimension integrals. This method has a number of applications in option pricing theory in finance.

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Year of publication:	1989
Authors:	Schroder, Mark
Published in:	Management Science. - Institute for Operations Research and the Management Sciences - INFORMS, ISSN 0025-1909. - Vol. 35.1989, 7, p. 823-827
Publisher:	Institute for Operations Research and the Management Sciences - INFORMS
Subject:	American call \| American put \| computational efficiency \| contingent claims \| coupon bonds \| multinormal

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Extent:	application/pdf
Type of publication:	Article
Other identifiers:	10.1287/mnsc.35.7.823 [DOI]
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10009214117