Hints for an extension of the early exercise premium formula for American options

Forskningsoutput: TidskriftsbidragArtikel i vetenskaplig tidskrift

Abstract

There exists a non-closed formula for the American put option price and non-trivial computations are required to solve it. Strong efforts have been made to propose efficient numerical techniques but few have strong mathematical reasoning to ascertain why they work well. We present an extension of the American put price aiming to catch weaknesses of the numerical methods based on their non-fulfillment of the smooth pasting condition.

Detaljer

Författare
  • Hans-Peter Bermin
  • Arturo Kohatsu-Higa
  • Josep Perelló
Externa organisationer
  • WestLB Securities Pacific Ltd.
  • Pompeu Fabra University
  • University of Barcelona
Forskningsområden

Ämnesklassifikation (UKÄ) – OBLIGATORISK

  • Nationalekonomi

Nyckelord

Originalspråkengelska
Sidor (från-till)152-157
Antal sidor6
TidskriftPhysica A: Statistical Mechanics and its Applications
Volym355
Utgivningsnummer1
StatusPublished - 2005 sep
PublikationskategoriForskning
Peer review utfördJa
Externt publiceradJa