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European option

A European option is either of put or call type:
European call Pay-off=max(S(T)-K,0)
European put Pay-off=max(K-S(T),0)
It is usually quite straight forward to obtain the value of European options. In the Black-Scholes case we have the famous Black-Scholes formula. For more general models it is possible to obtain the value by Fourier methods.

 

Questions: Magnus Wiktorsson
Last update: 2010 Jan 05 16:22:43. Validate: HTML CSS

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