Worst Case Pricing of Reverse Convertibles
Reverse Convertibles have become very popular in the German market. They are a common banking product for the private customer as well as for the institutional investor. Like ordinary convertibles it is a hybrid product. Its price depends on the development of one or several stock or indices as well as interest rates. To compute the price of this product one needs several input parameter such as volatility, dividends, interest rates, and correlation. These parameters normally cannot be estimated or forecasted exactly. However, it is often possible to give lower and upper bounds. Based on this information it is possible to derive worst case scenario models. These models are non-linear parabolic PDEs. We will show how to implement these models using a collocation finite element method. As examples we take several reverse convertibles which are traded currently.
Year of publication: |
2000-11
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Authors: | Topper, Jürgen |
Institutions: | Wirtschaftswissenschaftliche Fakultät, Leibniz Universität Hannover |
Saved in:
Series: | Hannover Economic Papers (HEP). - ISSN 0949-9962. |
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Type of publication: | Book / Working Paper |
Source: |
Persistent link: https://www.econbiz.de/10005464722
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