Abstract

  


 



The Pricing of Index Options When the Underlying Assets All Follow a Lognormal Diffusion


Robert Brooks


University of Alabama - Department of Economics, Finance and Legal Studies

Jon Corson


University of Alabama - Department of Mathematics

J. Donal Wales


affiliation not provided to SSRN

ADVANCES IN FUTURES AND OPTIONS RESEARCH, Volume 7, 1994

Abstract:     
In this paper, we present an index option pricing equation that is theoretically superior to prior models. Specially, we develop an analytic index option pricing equation assuming each security underlying the index follows geometric Brownian motion. We compare our model to the standard index option pricing model based on the Black and Scholes formula and find the difference to be significant.

JEL Classification: G13

Accepted Paper Series


Date posted: July 18, 2001  

Suggested Citation

Brooks, Robert E., Corson, Jon and Wales, J. Donal Donal, The Pricing of Index Options When the Underlying Assets All Follow a Lognormal Diffusion. ADVANCES IN FUTURES AND OPTIONS RESEARCH, Volume 7, 1994. Available at SSRN: http://ssrn.com/abstract=5735

Contact Information

Robert E. Brooks (Contact Author)
University of Alabama - Department of Economics, Finance and Legal Studies ( email )
P.O. Box 870244
Tuscaloosa, AL 35487
United States
205-348-8987 (Phone)
205-348-0590 (Fax)
HOME PAGE: http://www.cba.ua.edu/~rbrooks
Jon Corson
University of Alabama - Department of Mathematics ( email )
P. O. Box 870350
333C Gordon Palmer
Tuscaloosa, AL 35487-0350
United States
205-348-1965 (Phone)
J. Donal Wales
affiliation not provided to SSRN
Feedback to SSRN (Beta)


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