American chooser options
This paper examines the valuation of American chooser options, i.e., American-style contracts written on the maximum of an American put and an American call. The structure of the immediate exercise region is examined. The early exercise premium representation of the chooser's price is derived and used to construct a system of coupled recursive integral equations for a pair of boundary components. Numerical implementations of the model based on this system are carried out and used to examine the boundary properties and the price behavior.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Chiarella, Carl & Ziogas, Andrew, 2005.
"Evaluation of American strangles,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 29(1-2), pages 31-62, January.
- Carl Chiarella & Andrew Ziogas, 2002. "Evaluation of American Strangles," Research Paper Series 83, Quantitative Finance Research Centre, University of Technology, Sydney.
- Carl Chiarella & Andrew Ziogas, 2002. "Evaluation of American Strangles," Computing in Economics and Finance 2002 28, Society for Computational Economics.
- Gao, Bin & Huang, Jing-zhi & Subrahmanyam, Marti, 2000.
"The valuation of American barrier options using the decomposition technique,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 24(11-12), pages 1783-1827, October.
- Marti G. Subrahmanyam & Bin Gao & Jing-zhi Huang, 1998. "The Valuation of American Barrier Options Using the Decomposition Technique," New York University, Leonard N. Stern School Finance Department Working Paper Seires 98-067, New York University, Leonard N. Stern School of Business-.
- Siim Kallast & Andi Kivinukk, 2003. "Pricing and Hedging American Options Using Approximations by Kim Integral Equations," Review of Finance, Springer, vol. 7(3), pages 361-383.
- S. D. Jacka, 1991. "Optimal Stopping and the American Put," Mathematical Finance, Wiley Blackwell, vol. 1(2), pages 1-14.
- Broadie, Mark & Detemple, Jerome, 1996. "American Option Valuation: New Bounds, Approximations, and a Comparison of Existing Methods," Review of Financial Studies, Society for Financial Studies, vol. 9(4), pages 1211-50.
- Schroder, Mark, 1999. "Changes of Numeraire for Pricing Futures, Forwards, and Options," Review of Financial Studies, Society for Financial Studies, vol. 12(5), pages 1143-63.
- Mark Broadie & Jérôme Detemple, 1997. "The Valuation of American Options on Multiple Assets," Mathematical Finance, Wiley Blackwell, vol. 7(3), pages 241-286.
- Huang, Jing-zhi & Subrahmanyam, Marti G & Yu, G George, 1996. "Pricing and Hedging American Options: A Recursive Integration Method," Review of Financial Studies, Society for Financial Studies, vol. 9(1), pages 277-300.
- Peter Carr & Robert Jarrow & Ravi Myneni, 1992. "Alternative Characterizations Of American Put Options," Mathematical Finance, Wiley Blackwell, vol. 2(2), pages 87-106.
- Ju, Nengjiu, 1998. "Pricing an American Option by Approximating Its Early Exercise Boundary as a Multipiece Exponential Function," Review of Financial Studies, Society for Financial Studies, vol. 11(3), pages 627-46.
- Marek Rutkowski, 1994. "The Early Exercise Premium Representation Of Foreign Market American Options," Mathematical Finance, Wiley Blackwell, vol. 4(4), pages 313-325.
When requesting a correction, please mention this item's handle: RePEc:eee:dyncon:v:33:y:2009:i:1:p:128-153. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.