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| Author: | Cheung, J. Chung, R. |
| Title: | Valuation of complex financial instruments via basic components |
| Journal: | Review of Quantitative Finance and Accounting
1996 : VOL. 7:2, p. 163-176 |
| Index terms: | FINANCE ACCOUNTING VALUATION |
| Language: | eng |
| Abstract: | This article presents a graphical approach to measuring financial instruments. It observes that the payoff contingencies of a large number of single-payoff financial instruments can be reduced to a piecewise-linear cash flow, which can be replicated with a handful of basic building blocks. Four such building blocks are identified, and they all related to the concept of options. To demonstrate, this method is used to value several financial instruments: truncated standard call options, such like put options etc. |
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