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Optimal Choice Models for Executing Time to American Options

  • Feng Dai

    (Zhengzhou Information Engineering University)

  • Feng Han

    (Zhengzhou Information Engineering University)

Registered author(s):

Based on the structure models of options pricing on non-dividend-paying stock [16], this paper presents the choosing models and methods of optimal time of executing an American options for the first time. By using the models and methods, we can find the choosing criterion and optimal time to exercise the American options, i.e. the product of options price and its occurring probability is at maximum. So we can decide that an American option should be exercised or not in any time. The conclusions in this paper are more important in its consulting effect for single trader and organization investors to make their security market trade.

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File URL: http://econwpa.repec.org/eps/fin/papers/0412/0412016.pdf
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Paper provided by EconWPA in its series Finance with number 0412016.

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Length: 10 pages
Date of creation: 10 Dec 2004
Date of revision:
Handle: RePEc:wpa:wuwpfi:0412016
Note: Type of Document - pdf; pages: 10
Contact details of provider: Web page: http://econwpa.repec.org

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  1. DAI & Feng QIN & Zifu, 2005. "DF Structure Models for Options Pricing," The IUP Journal of Applied Economics, IUP Publications, vol. 0(6), pages 61-77, November.
  2. Merton, Robert C., 1976. "Option pricing when underlying stock returns are discontinuous," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 125-144.
  3. Peter Carr & Robert Jarrow & Ravi Myneni, 1992. "Alternative Characterizations Of American Put Options," Mathematical Finance, Wiley Blackwell, vol. 2(2), pages 87-106.
  4. Peter Ritchken & Rob Trevor, 1999. "Pricing Options under Generalized GARCH and Stochastic Volatility Processes," Journal of Finance, American Finance Association, vol. 54(1), pages 377-402, 02.
  5. 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 637-54, May-June.
  6. Barone-Adesi, Giovanni & Whaley, Robert E, 1987. " Efficient Analytic Approximation of American Option Values," Journal of Finance, American Finance Association, vol. 42(2), pages 301-20, June.
  7. Geske, Robert & Roll, Richard, 1984. " On Valuing American Call Options with the Black-Scholes European Formula," Journal of Finance, American Finance Association, vol. 39(2), pages 443-55, June.
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