American chooser options
AbstractThis paper examines the valuation of American chooser options, i.e., American-style contracts written on the maximum of an American put and an American call. The structure of the immediate exercise region is examined. The early exercise premium representation of the chooser's price is derived and used to construct a system of coupled recursive integral equations for a pair of boundary components. Numerical implementations of the model based on this system are carried out and used to examine the boundary properties and the price behavior.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Dynamics and Control.
Volume (Year): 33 (2009)
Issue (Month): 1 (January)
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Web page: http://www.elsevier.com/locate/jedc
American chooser options Exercise region Early exercise premium Integral equations;
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