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An approximation of American option prices in a jump-diffusion model

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  • Mulinacci, Sabrina

Abstract

In this paper, an effectively computable approximation of the price of an American option in a jump-diffusion market model will be shown: results of convergence in Lp and a.s. will be proved.

Suggested Citation

  • Mulinacci, Sabrina, 1996. "An approximation of American option prices in a jump-diffusion model," Stochastic Processes and their Applications, Elsevier, vol. 62(1), pages 1-17, March.
    • Handle: RePEc:eee:spapps:v:62:y:1996:i:1:p:1-17
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    References listed on IDEAS

    as
    1. Geske, Robert, 1979. "The valuation of compound options," Journal of Financial Economics, Elsevier, vol. 7(1), pages 63-81, March.
    2. Geske, Robert & Shastri, Kuldeep, 1985. "Valuation by Approximation: A Comparison of Alternative Option Valuation Techniques," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 20(1), pages 45-71, March.
    3. Barone-Adesi, Giovanni & Whaley, Robert E, 1987. "Efficient Analytic Approximation of American Option Values," Journal of Finance, American Finance Association, vol. 42(2), pages 301-320, June.
    4. Fabio Mercurio & Wolfgang J. Runggaldier, 1993. "Option Pricing For Jump Diffusions: Approximations and Their Interpretation," Mathematical Finance, Wiley Blackwell, vol. 3(2), pages 191-200, April.
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    Cited by:

    1. Jiang, George J., 1998. "Jump-diffusion model of exchange rate dynamics : estimation via indirect inference," Research Report 98A40, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    2. Andrew Ziogas & Carl Chiarella, 2003. "McKean’s Method applied to American Call Options on Jump-Diffusion Processes," Computing in Economics and Finance 2003 39, Society for Computational Economics.
    3. Ross A. Maller & David H. Solomon & Alex Szimayer, 2006. "A Multinomial Approximation For American Option Prices In Lévy Process Models," Mathematical Finance, Wiley Blackwell, vol. 16(4), pages 613-633, October.
    4. Philipp N. Baecker, 2007. "Real Options and Intellectual Property," Lecture Notes in Economics and Mathematical Systems, Springer, number 978-3-540-48264-2, December.
    5. Carl Chiarella & Andrew Ziogas, 2009. "American Call Options Under Jump-Diffusion Processes - A Fourier Transform Approach," Applied Mathematical Finance, Taylor & Francis Journals, vol. 16(1), pages 37-79.
    6. Wee, In-Suk, 1999. "Stability for multidimensional jump-diffusion processes," Stochastic Processes and their Applications, Elsevier, vol. 80(2), pages 193-209, April.
    7. N. Hilber & N. Reich & C. Schwab & C. Winter, 2009. "Numerical methods for Lévy processes," Finance and Stochastics, Springer, vol. 13(4), pages 471-500, September.
    8. repec:dgr:rugsom:98a40 is not listed on IDEAS

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