The Compound Option Approach to American Options on Jump-Diffusions
AbstractWe derive analytical valuation formulas for compound options when the underlying asset follows a jump-diffusion process. We then apply these results to value extendible options, American call options on stocks that follow jump-diffusion processes and pay discrete dividends, and American options on assets that evolve as jump-diffusion processes and pay continuous proportional dividends. Numerical implementation is in progress.
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Bibliographic InfoPaper provided by Society for Computational Economics in its series Computing in Economics and Finance 2001 with number 181.
Date of creation: 01 Apr 2001
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Compound options; american options; jump-diffusions;
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