The Valuation of Sequential Exchange Opportunities

  • Author(s): PETER CARR
  • Published: Apr 30, 2012
  • Pages: 1235-1256
  • DOI: 10.1111/j.1540-6261.1988.tb03967.x


Sequential exchange opportunities are valued using the techniques of modern option‐pricing theory. The vehicle for analysis is the concept of a compound exchange option. This security is shown to exist implicitly in several contractual settings. A valuation formula for this option is derived. The formula is shown to generalize much previous work in option pricing. Several applications of the formula are presented.

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