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.

The Finite Element Method is a well-studied and well-understood method of solving partial differential equations. It's applicability to financial models formulated as PDEs is demonstrated. It's advantage concerning the computation of accurate `Greeks' is delineated. This is demonstrated with...

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...