caa a22 4500 386309000 CHVBK 20180307111538.0 cr unu---uuuuu 161130e198803 xx s 000 0 eng 10.2307/2331019 doi S0022109000012874 pii (NATIONALLICENCE)cambridge-10.2307/2331019 Boyle Phelim P. A Lattice Framework for Option Pricing with Two State Variables [Elektronische Daten] [Phelim P. Boyle] 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 jump amplitudes may be obtained when there are two state variables. This procedure can be used to price any contingent claim whose payoff is a piece-wise linear function of two underlying state variables, provided these two variables have a bivariate lognormal distribution. The accuracy of the method is illustrated by valuing options on the maximum and minimum of two assets and comparing the results for cases in which an exact solution has been obtained for European options. One advantage of the lattice approach is that it handles the early exercise feature of American options. In addition, it should be possible to use this approach to value a number of financial instruments that have been created in recent years. Copyright © School of Business Administration, University of Washington 1988 Journal of Financial and Quantitative Analysis Cambridge University Press 23/1(1988-03), 1-12 0022-1090 23:1<1 1988 23 JFQ https://doi.org/10.2307/2331019 text/html Onlinezugriff via DOI 1 research-article jats NATIONALLICENCE 856 40 https://doi.org/10.2307/2331019 text/html Onlinezugriff via DOI NATIONALLICENCE 100 1- Boyle Phelim P. NATIONALLICENCE 773 0- Journal of Financial and Quantitative Analysis Cambridge University Press 23/1(1988-03), 1-12 0022-1090 23:1<1 1988 23 JFQ CC0 http://creativecommons.org/publicdomain/zero/1.0 nationallicence BK010053 XK010053 XK010000 NATIONALLICENCE NATIONALLICENCE NL-cambridge