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New Methods with Capped Options for Pricing American Options

Author

Listed:
  • Dongya Deng
  • Cuiye Peng

Abstract

We propose two new methods: improved binomial methods and improved least square MonteCarlo methods (LSM), for pricing American options. These two methods are developed using the nice capped options which have closed‐form formulas. Numerical examples are provided to verify that these two new methods are pretty efficient.

Suggested Citation

  • Dongya Deng & Cuiye Peng, 2014. "New Methods with Capped Options for Pricing American Options," Journal of Applied Mathematics, John Wiley & Sons, vol. 2014(1).
    • Handle: RePEc:wly:jnljam:v:2014:y:2014:i:1:n:176306
    DOI: 10.1155/2014/176306
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    References listed on IDEAS

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