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The Analytic Valuation of American Options

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Author Info
Kim, In Joon
Abstract

No analytic solutions exists for the valuation of American options written on futures contracts and foreign currencies for which early exercise may be optimal. This article formulates the American option valuation problem in economically and mathematically meaningful ways. This enables us to derive valuation formulas for American options. The properties associated with the optimal exercise boundary are examined, and a numerical technique to implement the valuation formulas is presented. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

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File URL: http://www.jstor.org/fcgi-bin/jstor/listjournal.fcg/08939454
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Publisher Info
Article provided by Oxford University Press for Society for Financial Studies in its journal Review of Financial Studies.

Volume (Year): 3 (1990)
Issue (Month): 4 ()
Pages: 547-72
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:oup:rfinst:v:3:y:1990:i:4:p:547-72

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  1. Carl Chiarella & Andrew Ziogas, 2006. "American Call Options on Jump-Diffusion Processes: A Fourier Transform Approach," Research Paper Series 174, Quantitative Finance Research Centre, University of Technology, Sydney. [Downloadable!]
  2. Carl Chiarella & Andrew Ziogas, 2002. "Evaluation of American Strangles," Computing in Economics and Finance 2002 28, Society for Computational Economics. [Downloadable!]
    Other versions:
  3. Pierangelo Ciurlia & Ilir Roko, 2004. "Valuation of American Continuous-Installment Options," Computing in Economics and Finance 2004 345, Society for Computational Economics. [Downloadable!]
    Other versions:
  4. Christian Pierdzioch, 2000. "The Effectiveness of the FX Market Interventions of the Bundesbank During the Louvre Period: An Options-Based Analysis," Kiel Working Papers 971, Kiel Institute for the World Economy. [Downloadable!]
  5. Roland Mallier & Ghada Alobaidi, 2000. "Laplace transforms and American options," Applied Mathematical Finance, Taylor and Francis Journals, vol. 7(4), pages 241-256, December. [Downloadable!] (restricted)
  6. Carl Chiarella & Adam Kucera & Andrew Ziogas, 2004. "A Survey of the Integral Representation of American Option Prices," Research Paper Series 118, Quantitative Finance Research Centre, University of Technology, Sydney. [Downloadable!]
  7. Mark Broadie & Jérôme B. Detemple, 1996. "American Options on Dividend-Paying Assets," CIRANO Working Papers 96s-16, CIRANO. [Downloadable!]
  8. B. Gao J. Huang, . "The Valuation of American Barrier Options Using the Decomposition Technique," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-002, New York University, Leonard N. Stern School of Business-. [Downloadable!]
  9. Mark Broadie & Jérôme B. Detemple, 1996. "Recent Advances in Numerical Methods for Pricing Derivative Securities," CIRANO Working Papers 96s-17, CIRANO. [Downloadable!]
  10. Carl Chiarella & Andrew Ziogas, 2004. "McKean's Methods Applied to American Call Options on Jump-Diffusion Processes," Research Paper Series 117, Quantitative Finance Research Centre, University of Technology, Sydney. [Downloadable!]
    Other versions:
  11. Rachel A. Kuske, Joseph B. Keller, 1998. "Optimal exercise boundary for an American put option," Applied Mathematical Finance, Taylor and Francis Journals, vol. 5(2), pages 107-116, June. [Downloadable!] (restricted)
  12. Manuel Moreno & Javier R. Navas, 2001. "On the Robustness of Least-Squares Monte Carlo (LSM) for Pricing American Derivatives," Economics Working Papers 543, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
    Other versions:
  13. Denis Belomestny & Pavel V. Gapeev, 2006. "An Iteration Procedure for Solving Integral Equations Related to Optimal Stopping Problems," SFB 649 Discussion Papers SFB649DP2006-043, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany. [Downloadable!]
  14. Jérôme B. Detemple & Carlton Osakwe, 1999. "The Valuation of Volatility Options," CIRANO Working Papers 99s-43, CIRANO. [Downloadable!]
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