Abstracts

This paper introduces variants of Strangles, called Euro-American or hybrid Strangles, and promotes a new numerical pricing technique. We highlight and compare properties of European, American and hybrid Strangles with pricing and hedging in mind. The new quadrature approach can deal with coupled integral equation systems locating early exercise boundaries of existing finite-lived contracts. The method is efficient, accurate and fast for pricing early exercisable Strangles. Other comparative advantages are that it avoids the non-monotonic gradient problem faced by precursors and allow users to control for errors. We then investigate the hedging of all Strangles, derive analytical expressions for some Greek parameters and finally stress how these parameters can differ (or not) one another.