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Analytical pricing of American options

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  • Jun Cheng

    ()

  • Jin Zhang

    ()

Abstract

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Suggested Citation

  • Jun Cheng & Jin Zhang, 2012. "Analytical pricing of American options," Review of Derivatives Research, Springer, vol. 15(2), pages 157-192, July.
  • Handle: RePEc:kap:revdev:v:15:y:2012:i:2:p:157-192
    DOI: 10.1007/s11147-011-9073-6
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    References listed on IDEAS

    as
    1. Fang, Fang & Oosterlee, Kees, 2008. "A Novel Pricing Method For European Options Based On Fourier-Cosine Series Expansions," MPRA Paper 9319, University Library of Munich, Germany.
    2. J. D. Evans & R. Kuske & Joseph B. Keller, 2002. "American options on assets with dividends near expiry," Mathematical Finance, Wiley Blackwell, vol. 12(3), pages 219-237.
    3. Chung, San-Lin & Shih, Pai-Ta, 2009. "Static hedging and pricing American options," Journal of Banking & Finance, Elsevier, vol. 33(11), pages 2140-2149, November.
    4. Jing Zhao & Hoi Ying Wong, 2012. "A closed-form solution to American options under general diffusion processes," Quantitative Finance, Taylor & Francis Journals, vol. 12(5), pages 725-737, July.
    5. Chen, Ren-Raw & Yeh, Shih-Kuo, 2002. "Analytical Upper Bounds for American Option Prices," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 37(01), pages 117-135, March.
    6. Fang, Fang & Oosterlee, Kees, 2008. "Pricing Early-Exercise and Discrete Barrier Options by Fourier-Cosine Series Expansions," MPRA Paper 9248, University Library of Munich, Germany.
    7. Heston, Steven L, 1993. "A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options," Review of Financial Studies, Society for Financial Studies, vol. 6(2), pages 327-343.
    8. Orlin J. Grabbe, "undated". "The Pricing of Call and Put Options on Foreign Exchange," Rodney L. White Center for Financial Research Working Papers 06-83, Wharton School Rodney L. White Center for Financial Research.
    9. Chiarella, Carl & Ziogas, Andrew, 2005. "Evaluation of American strangles," Journal of Economic Dynamics and Control, Elsevier, vol. 29(1-2), pages 31-62, January.
    10. Song-Ping Zhu, 2006. "An exact and explicit solution for the valuation of American put options," Quantitative Finance, Taylor & Francis Journals, vol. 6(3), pages 229-242.
    11. Orlin Grabbe, J., 1983. "The pricing of call and put options on foreign exchange," Journal of International Money and Finance, Elsevier, vol. 2(3), pages 239-253, December.
    12. Muthuraman, Kumar, 2008. "A moving boundary approach to American option pricing," Journal of Economic Dynamics and Control, Elsevier, vol. 32(11), pages 3520-3537, November.
    13. Chung, San-Lin & Chang, Hsieh-Chung, 2007. "Generalized Analytical Upper Bounds for American Option Prices," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 42(01), pages 209-227, March.
    14. Guy Barles & Julien Burdeau & Marc Romano & Nicolas Samsoen, 1995. "Critical Stock Price Near Expiration," Mathematical Finance, Wiley Blackwell, vol. 5(2), pages 77-95.
    15. Chung, San-Lin & Hung, Mao-Wei & Wang, Jr-Yan, 2010. "Tight bounds on American option prices," Journal of Banking & Finance, Elsevier, vol. 34(1), pages 77-89, January.
    16. Dai, Min & Li, Peifan & Zhang, Jin E., 2010. "A lattice algorithm for pricing moving average barrier options," Journal of Economic Dynamics and Control, Elsevier, vol. 34(3), pages 542-554, March.
    17. Merton, Robert C., 1976. "Option pricing when underlying stock returns are discontinuous," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 125-144.
    18. Carl Chiarella & Boda Kang & Gunter H. Meyer, 2010. "The Evaluation Of Barrier Option Prices Under Stochastic Volatility," Research Paper Series 266, Quantitative Finance Research Centre, University of Technology, Sydney.
    19. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    20. David S. Bunch & Herb Johnson, 2000. "The American Put Option and Its Critical Stock Price," Journal of Finance, American Finance Association, vol. 55(5), pages 2333-2356, October.
    21. Peter Carr & Robert Jarrow & Ravi Myneni, 2008. "Alternative Characterizations Of American Put Options," World Scientific Book Chapters,in: Financial Derivatives Pricing Selected Works of Robert Jarrow, chapter 5, pages 85-103 World Scientific Publishing Co. Pte. Ltd..
    22. Chiarella, Carl & El-Hassan, Nadima & Kucera, Adam, 1999. "Evaluation of American option prices in a path integral framework using Fourier-Hermite series expansions," Journal of Economic Dynamics and Control, Elsevier, vol. 23(9-10), pages 1387-1424, September.
    23. 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 627-646.
    24. S. D. Jacka, 1991. "Optimal Stopping and the American Put," Mathematical Finance, Wiley Blackwell, vol. 1(2), pages 1-14.
    25. Orlin J. Grabbe, "undated". "The Pricing of Call and Put Options on Foreign Exchange," Rodney L. White Center for Financial Research Working Papers 6-83, Wharton School Rodney L. White Center for Financial Research.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    American options; Optimal exercise boundary; Homotopy analysis method; G13;

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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