Bermuda option

In securities trading, a Bermuda option is an option with multiple exercise times. Is not exercised at an exercise time, d. H. If the base value is not selected, an exercise right remains for the following exercise dates. If the base value is selected at an exercise time, the following exercise rights expire. The name Bermuda option comes from the fact that Bermuda lies between America and Europe, just as a Bermuda option also has features of an American and a European option.

rating

As a rule, it is not possible to derive a closed valuation formula for Bermuda options. The evaluation therefore requires numerical methods. The evaluation is possible in a simple way with tree methods or the numerical solution of the partial differential equations . The assessment using Monte Carlo methods , however, requires further efforts.

Web links

• Java applet for evaluating Bermuda options in the Black-Scholes model using Monte Carlo methods

literature

• Christian P. Fries : Financial Mathematics: Theory, Modeling, Implementation . Frankfurt am Main 2006. 400 pages, PDF file, Creative Commons license.
• Michael Günther, Ansgar Jüngel: Financial derivatives with MATLAB. Mathematical modeling and numerical simulation. Vieweg, Wiesbaden 2003, ISBN 3-528-03204-9 .