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Pricing Multidimensional American Options

Author

Listed:
  • Elettra Agliardi

    (Department of Economics, University of Bologna, Via San Giacomo 3, 40126 Bologna, Italy)

  • Rossella Agliardi

    (Department of Mathematics, University of Bologna, Viale Filopanti 5, 40126 Bologna, Italy)

Abstract

A new explicit form is provided for the solution of optimal stopping problems involving a multidimensional geometric Brownian motion. A free-boundary value approach is adopted and the value function is obtained via fundamental solution methods. There are many applications for the valuation of perpetual options of American style, which are of interest for finance and managerial decisions.

Suggested Citation

  • Elettra Agliardi & Rossella Agliardi, 2023. "Pricing Multidimensional American Options," IJFS, MDPI, vol. 11(1), pages 1-10, March.
    • Handle: RePEc:gam:jijfss:v:11:y:2023:i:1:p:51-:d:1104453
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    References listed on IDEAS

    as
    1. Carr, Peter, 1998. "Randomization and the American Put," The Review of Financial Studies, Society for Financial Studies, vol. 11(3), pages 597-626.
    2. Brennan, Michael J & Schwartz, Eduardo S, 1977. "The Valuation of American Put Options," Journal of Finance, American Finance Association, vol. 32(2), pages 449-462, May.
    3. Oldouz Samimi & Farshid Mehrdoust, 2018. "Pricing multi-asset American option under Heston stochastic volatility model," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 5(03), pages 1-16, September.
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