This paper establishes conditions under which a portfolio consisting of the averages of K blocks of lognormal variables converges to a K-dimensional lognormal variable as the number of variables in each block increases. The associated block covariance matrix has to have a special structure where...

This paper examines the pricing of lookback and barrier options when the underlying asset follows the constant elasticity of variance (CEV) process. We construct a trinomial method to approximate the CEV process and use it to price lookback and barrier options. For look-back options, we find...

An approximate method is developed for computing the values of European options on the maximum or the minimum of several assets. The method is very fast and is accurate for parameter ranges that are often of the most interest. The approach casts the problem in terms of order statistics and can...

A procedure is developed for the valuation of options when there are two underlying state variables. The approach involves an extension of the lattice binomial approach developed by Cox, Ross, and Rubinstein to value options on a single asset. Details are given on how the jump probabilities and...

In this paper, we propose an estimator for pricing high-dimensional American-style options and show that asymptotically its upper bias converges to zero. An advantage of the proposed estimator is that when combined with low discrepancy sequences, it exhibits a superior rate of convergence....

It is well established that the standard Black-Scholes model does a very poor job in matching the prices of vanilla European options. The implied volatility varies by both time to maturity and by the moneyness of the option. One approach to this problem is to use the market option prices to back...