Options on two underlyings are a common exotic product in the equity and FX derivatives market. The value of these kinds of options depends on the correlation of the two underlyings. We will present a model to compute a lower bound for the price of this option. The model, represented by a...

We will present a model to compute a lower bound for the price of this option. The model, represented by a non-linear parabolic PDE, is implemented with finite elements in order to demonstrate the results with several derivatives from the European market.

Except for special cases, passport option s do not have closed-form solutions. Here we show how to derive approximate solutions using finite element methods. We also show that finite elements offer advantages in computing the hedge parameters.

Options on two underlyings are a common exotic product in the equity and FX derivatives market. The value of these kinds of options depends on the correlation of the two underlyings. We will present a model to compute a lower bound for the price of this option. The model, represented by a...

Except for special cases, passport options do not have closed-form solutions. Here we show how to derive approximate solutions using finite element methods. We also show that finite elements offer advantages in computing the hedge parameters