Analytic American Option Pricing and Applications
AbstractI use a convenient value breakdown in order to obtain analytic solutions for finitematurity American option prices.Such a barrier-option-based breakdown yields an analytic lower bound for the American option price, which is as price-tight as the Barone-Adesi and Whaley (1987) analytic value proxy for short and medium maturities and exhibits good convergence to the Merton (1973) perpetual option price for large maturities.
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Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2003-64.
Date of creation: 2003
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option pricing; financial markets;
Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-07-29 (All new papers)
- NEP-CFN-2003-07-29 (Corporate Finance)
- NEP-FIN-2003-07-29 (Finance)
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