Essay About Bermudan Option And Binomial Modelseminar Paper

Pricing a Bermudan Option with the Binomial Model
Pricing a Bermudan Option with the Binomial ModelSeminar paper in the courseDerivativesUniversity of Ljubljana, Faculty of EconomicsSummer semester 2015mentor:                         izr. prof. dr. Aleš Ahčanstudents:                         Eva Kießling                                        Martina Marmai                                        Žiga KoritnikTable of ContentTable of Content        List of Figures        List of Abbreviations        1.        Introduction        2.        The Financial Instrument        3.        The Binomial Model        3.1        Example 1:        3.2        Example 2        4.        Bermudan Option        4.1        How it works        5.        Results        Annex                References        List of FiguresAbbildung 1: Beispiel für eine Abbildung FH Logo        Abbildung 2: Beispiel 2 Urkunde        List of Abbreviationsa.a.O.        am angeführten OrtAO        AbgabenordnungAufl.        AuflageIntroductionThis seminar paper deals with pricing a Bermudan option through the adoption of the binomial model. Using the binomial model is suitable for this type of option because this kind of financial instrument is designed to give the holder the opportunity of an early exercise, and the binomial model evaluates whether exercising before maturity or waiting brings a higher pay-off.(Cox et al. 1979, p. 1)Our paper provides therefore necessary theoretical foundation which includes information about the option type itself and the binomial model. The second part will explain the methodology of pricing the Bermudan option, and finally the pricing will be done with the program »EXCEL«.