American options on assets with dividends near expiry
AbstractExplicit expressions valid near expiry are derived for the values and the optimal exercise boundaries of American put and call options on assets with dividends. The results depend sensitively on the ratio of the dividend yield rate "D" to the interest rate "r". For "D">"r" the put boundary near expiry tends parabolically to the value "rK"/"D" where "K" is the strike price, while for "D" "r" the boundary tends to "K" in the parabolic-logarithmic form found for the case "D"=0 by Barles et al. (1995) and by Kuske and Keller (1998). For the call, these two behaviors are interchanged: parabolic and tending to "rK"/"D" for "D">"r", as was shown by Wilmott, Dewynne, and Howison (1993), and parabolic-logarithmic and tending to "K" for "D" "r". The results are derived twice: once by solving an integral equation, and again by constructing matched asymptotic expansions. Copyright 2002 Blackwell Publishing, Inc..
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Wiley Blackwell in its journal Mathematical Finance.
Volume (Year): 12 (2002)
Issue (Month): 3 ()
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0960-1627
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Chung, San-Lin & Shih, Pai-Ta, 2009. "Static hedging and pricing American options," Journal of Banking & Finance, Elsevier, vol. 33(11), pages 2140-2149, November.
- Minqiang Li, 2010.
"Analytical approximations for the critical stock prices of American options: a performance comparison,"
Review of Derivatives Research,
Springer, vol. 13(1), pages 75-99, April.
- Minqiang Li, Li, 2009. "Analytical Approximations for the Critical Stock Prices of American Options: A Performance Comparison," MPRA Paper 15018, University Library of Munich, Germany.
- Zhu, Song-Ping & Chen, Wen-Ting, 2013. "An inverse finite element method for pricing American options," Journal of Economic Dynamics and Control, Elsevier, vol. 37(1), pages 231-250.
- Chung, San-Lin & Hung, Mao-Wei & Wang, Jr-Yan, 2010. "Tight bounds on American option prices," Journal of Banking & Finance, Elsevier, vol. 34(1), pages 77-89, January.
- Anna Battauz & Marzia De Donno & Alessandro Sbuelz, 2013. "Real Options and American Derivatives: the Double Continuation Region," Working Papers 499, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Jun Cheng & Jin Zhang, 2012. "Analytical pricing of American options," Review of Derivatives Research, Springer, vol. 15(2), pages 157-192, July.
- Medvedev, Alexey & Scaillet, Olivier, 2010. "Pricing American options under stochastic volatility and stochastic interest rates," Journal of Financial Economics, Elsevier, vol. 98(1), pages 145-159, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.