A Simple and Numerically Efficient Valuation Method for American Puts Using a Modified Geske-Johnson Approach
R. Geske and H. E. Johnson (1984) develop an equation for the American put price and obtain accurate prices using a method requiring quadrivariate normal integrals evaluated over an interval containing four equally spaced exercise points. The authors show that a modification of their method, which uses optimal placement of exercise points, yields, in most cases, accurate values using nothing more than bivariate normals. In the more difficult (deep-in-the-money) cases, trivariate normals suffice. Copyright 1992 by American Finance Association.
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Volume (Year): 47 (1992)
Issue (Month): 2 (June)
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