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Abstract
This paper focuses on the problem of pricing the cliquet options which provide a guaranteed minimum annual return. The tree method which we propose simplifies the standard binomial Cox–Ross–Rubinstein approach which, in this context, is problematic from a computational point of view. Our technique provides very efficient and reliable evaluations in a Black-Scholes framework with piecewise constant interest rates and volatilities.
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Authors and Affiliations
Dipartimento di Finanza dell’Impresa e dei Mercati Finanziari, University of Udine, Via Tomadini 30/a, 33100, Udine, Italy
Marcellino Gaudenzi & Antonino Zanette
- Marcellino Gaudenzi
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- Antonino Zanette
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Correspondence toMarcellino Gaudenzi.
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This research was supported by MIUR (Prin 2007).
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Gaudenzi, M., Zanette, A. Pricing cliquet options by tree methods.Comput Manag Sci8, 125–135 (2011). https://doi.org/10.1007/s10287-009-0109-4
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