Powered by



Back Next


Various Passport Options and Their Valuation

H. Ahn, A. Penaud, P. Wilmott


The passport option is a call option on the balance of a trading account. The option holder retains the gain from trading, while the writer is liable for the loss. We establish pricing equations for various passport options including the multi-asset passport and those with discrete trading constraints. The results are typically known as the Hamilton- Jacobi-Bellman equations and multiple layers of free boundary partial dierential equations for a sequence of optimal stopping times. Also we examine the gain by selling passport options to utility maximising investors and to investors who guess the market from imperfect information.

Click here to download paper (359 kB)


Back Next