The Compound Option Approach to American Options on Jump-Diffusions
We derive analytical valuation formulas for compound options when the underlying asset follows a jump-diffusion process. We then apply these results to value extendible options, American call options on stocks that follow jump-diffusion processes and pay discrete dividends, and American options on assets that evolve as jump-diffusion processes and pay continuous proportional dividends. Numerical implementation is in progress.
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|Date of creation:||01 Apr 2001|
|Contact details of provider:|| Web page: http://www.econometricsociety.org/conference/SCE2001/SCE2001.html|
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