Analytical Approximations To The Valuation Of American Options
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Analytical Approximations To The Valuation Of American Options
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Author : Andreas Andrikopoulos
language : en
Publisher:
Release Date : 2007
Analytical Approximations To The Valuation Of American Options written by Andreas Andrikopoulos and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with categories.
The quadratic approximation to the valuation of american options on stocks is revisited, constructing a pricing approach based on the fact that the early exercise policy should be chosen to maximize the value of the option. At the first part of the paper, we apply this approach (boundary-optimality) in the setting of the pricing model suggested in Barone-Adesi and Whaley (1987). We enrich their original valuation setting with an additional parameter, computed with the help of a boundary-optimality boundary condition. This approach enhances the accuracy performance of the Barone-Adesi and Whaley (1987) approximation. In the second part of the paper we introduce a novel approximation approach, where option value is the product of two functions, one of the being a function of time and the other one being a function of the stock price. Applying the principle that the early exercise policy should maximize option value, this alternative option pricing technique provides accurate results for american call and put options.
The Quadratic Approximation For The Value Of American Options
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Author : Andreas Andrikopoulos
language : en
Publisher:
Release Date : 2013
The Quadratic Approximation For The Value Of American Options written by Andreas Andrikopoulos and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
The valuation of put options with early-exercise opportunities constitutes a major challenge of asset pricing. The option-theoretic response to this challenge relies on the estimation of the optimal exercise boundary. This paper introduces a novel quadratic approximation for the valuation of American options on common stock. The paper's contribution lies in the tradition of semi-analytical approximation of American put options, which was put forward in Barone-Adesi and Whaley (1987). Assuming that the interest rate and the volatility are constant, the early-exercise premium is modeled as a product of two functions, one being a function of time and the other being a function of the stock price. The numerical results demonstrate the accuracy of the method, over competing alternatives such as the Barone-Adesi and Whaley (1987) algorithm.
Analytic Approximations For The Valuation Of American Options
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Author : Jongwoo Lee
language : en
Publisher:
Release Date : 2001
Analytic Approximations For The Valuation Of American Options written by Jongwoo Lee and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2001 with categories.
On The Valuation Of American Exchange Options
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Author : Andreas Andrikopoulos
language : en
Publisher:
Release Date : 2009
On The Valuation Of American Exchange Options written by Andreas Andrikopoulos and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with categories.
We adopt a quadratic approach to the valuation of the option to exchange one asset for another, when the option owner has the right to exercise prior to option expiration. Accurate pricing results are obtained and tested against competitive models in the literature, building on the hypothesis that option value is the product of two functions, one being a function of time, and the other one being a function of the stock prices.
On The Quadratic Valuation Of American Options
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Author : Andreas Andrikopoulos
language : en
Publisher:
Release Date : 2010
On The Quadratic Valuation Of American Options written by Andreas Andrikopoulos and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with categories.
This paper extends the framework of analytical approximations to the valuation of American options by suggesting alternative forms for the value function of the American option. We model the value function of the early exercise premium as a product of two functions, one of which being a function of time and the other being a function of price and test the accuracy of an alternative functional forms for the time-function. The tested functional form leads to fast and accurate valuation of options with early exercise opportunities.
On The Quadratic Approximation To The Value Of American Options
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Author : Andreas Andrikopoulos
language : en
Publisher:
Release Date : 2007
On The Quadratic Approximation To The Value Of American Options written by Andreas Andrikopoulos and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with categories.
This paper extends the quasi-analytical quadratic approximation of Barone-Adesi and Whaley (1987) in order to improve its performance for options with long time to expiration. We build a system of equations with an extra parameter and an additional boundary condition (boundary-optimality), ensuring that the derived exercise boundary maximizes the price of the option. Numerical results for this approach show improved convergence performance for the quadratic approximation in the case of longer option lives.
Analytic Approximation For The Valuation Of American Put Options On Stocks With Known Dividends
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Author : Edwin O. Fischer
language : de
Publisher:
Release Date : 1989
Analytic Approximation For The Valuation Of American Put Options On Stocks With Known Dividends written by Edwin O. Fischer and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1989 with categories.
Simple Analytical Approximations For The Critical Stock Price Of American Options
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Author : Robert Frontczak
language : en
Publisher:
Release Date : 2013
Simple Analytical Approximations For The Critical Stock Price Of American Options written by Robert Frontczak and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
Recent results for pricing American options based on Mellin transforms are used to derive several approximations for the critical stock price of a finite-living American option. We prove important theoretical properties of the derived approximations and compare our results to other approaches found in the literature.
The Numerical Solution Of The American Option Pricing Problem
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Author : Carl Chiarella
language : en
Publisher: World Scientific
Release Date : 2014-10-14
The Numerical Solution Of The American Option Pricing Problem written by Carl Chiarella and has been published by World Scientific this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-10-14 with Options (Finance) categories.
The early exercise opportunity of an American option makes it challenging to price and an array of approaches have been proposed in the vast literature on this topic. In The Numerical Solution of the American Option Pricing Problem, Carl Chiarella, Boda Kang and Gunter Meyer focus on two numerical approaches that have proved useful for finding all prices, hedge ratios and early exercise boundaries of an American option. One is a finite difference approach which is based on the numerical solution of the partial differential equations with the free boundary problem arising in American option pricing, including the method of lines, the component wise splitting and the finite difference with PSOR. The other approach is the integral transform approach which includes Fourier or Fourier Cosine transforms. Written in a concise and systematic manner, Chiarella, Kang and Meyer explain and demonstrate the advantages and limitations of each of them based on their and their co-workers'' experiences with these approaches over the years. Contents: Introduction; The Merton and Heston Model for a Call; American Call Options under Jump-Diffusion Processes; American Option Prices under Stochastic Volatility and Jump-Diffusion Dynamics OCo The Transform Approach; Representation and Numerical Approximation of American Option Prices under Heston; Fourier Cosine Expansion Approach; A Numerical Approach to Pricing American Call Options under SVJD; Conclusion; Bibliography; Index; About the Authors. Readership: Post-graduates/ Researchers in finance and applied mathematics with interest in numerical methods for American option pricing; mathematicians/physicists doing applied research in option pricing. Key Features: Complete discussion of different numerical methods for American options; Able to handle stochastic volatility and/or jump diffusion dynamics; Able to produce hedge ratios efficiently and accurately"
Computational Finance 1999
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Author : Yaser S. Abu-Mostafa
language : en
Publisher: MIT Press
Release Date : 2000
Computational Finance 1999 written by Yaser S. Abu-Mostafa and has been published by MIT Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000 with Business & Economics categories.
This book covers the techniques of data mining, knowledge discovery, genetic algorithms, neural networks, bootstrapping, machine learning, and Monte Carlo simulation. Computational finance, an exciting new cross-disciplinary research area, draws extensively on the tools and techniques of computer science, statistics, information systems, and financial economics. This book covers the techniques of data mining, knowledge discovery, genetic algorithms, neural networks, bootstrapping, machine learning, and Monte Carlo simulation. These methods are applied to a wide range of problems in finance, including risk management, asset allocation, style analysis, dynamic trading and hedging, forecasting, and option pricing. The book is based on the sixth annual international conference Computational Finance 1999, held at New York University's Stern School of Business.