| Article ID: | iaor20084239 |
| Country: | United States |
| Volume: | 2006 |
| Issue: | 60824 |
| Start Page Number: | 1 |
| End Page Number: | 9 |
| Publication Date: | Jan 2006 |
| Journal: | Journal of Applied Mathematics and Stochastic Analysis |
| Authors: | Alobaidi G., Mallier R. |
| Keywords: | investment, finance & banking |
We use an asymptotic expansion to study the behavior of installment options close to expiry. Installment options are contracts where the price is paid over the life of the option rather than as a lump sum at the time of purchase, and where the contract can be allowed to lapse at any time. Series solutions are obtained for the location of the free boundary and the price of the option.