A unified approach to determining the early exercise boundary position at expiry for American style of general class of derivatives
In this paper, we present a new method for calculating the limit of early exercise boundary at expiry. We price American style of general derivative using a formula expressed as a sum of the value of European style of derivative and so called American premium. We use the latter expression to calculate an analytic formula for limit of early exercise boundary at expiry. Method applied on American style plain vanilla, Asian and lookback options yields identical results with already known values. Results for selected American style of derivative strategies are compared with limits calculated by the PSOR method.
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.
- Tomas Bokes & Daniel Sevcovic, 2009. "Early exercise boundary for American type of floating strike Asian option and its numerical approximation," Papers 0912.1321, arXiv.org.
- Asbjørn T. Hansen & Peter Løchte Jørgensen, 2000. "Analytical Valuation of American-Style Asian Options," Management Science, INFORMS, vol. 46(8), pages 1116-1136, August.
- Daniel Sevcovic, 2008. "Transformation methods for evaluating approximations to the optimal exercise boundary for linear and nonlinear Black-Scholes equations," Papers 0805.0611, arXiv.org.
When requesting a correction, please mention this item's handle: RePEc:arx:papers:1012.0348. 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: (arXiv administrators)
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.