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Article: Analytical pricing of American options

TitleAnalytical pricing of American options
Authors
Cheng, JZhang, JE
KeywordsAmerican options
Homotopy analysis method
Optimal exercise boundary
Issue Date2012
PublisherSpringer New York LLC. The Journal's web site is located at http://springerlink.metapress.com/openurl.asp?genre=journal&issn=1380-6645
Citation
Review Of Derivatives Research, 2012, v. 15 n. 2, p. 157-192 How to Cite?
DOI: http://dx.doi.org/10.1007/s11147-011-9073-6
AbstractBy using the homotopy analysis method, we derive a new explicit approximate formula for the optimal exercise boundary of American options on an underlying asset with dividend yields. Compared with highly accurate numerical values, the new formula is shown to be valid for up to 2 years of time to maturity, which is ten times longer than existing explicit approximate formulas. The option price errors computed with our formula are within a few cents for American options that have moneyness (the ratio between stock and strike prices) from 0. 8 to 1. 2, strike prices of 100 dollars and 2 years to maturity. © 2012 Springer Science+Business Media, LLC.
Persistent Identifierhttp://hdl.handle.net/10722/152925
ISSN
1380-6645
2021 Impact Factor: 0.786
2020 SCImago Journal Rankings: 0.330
ISI Accession Number ID
WOS:000305384300003
References
References in Scopus

 

DC FieldValueLanguage
dc.contributor.authorCheng, Jen_HK
dc.contributor.authorZhang, JEen_HK
dc.date.accessioned2012-07-16T09:51:53Z-
dc.date.available2012-07-16T09:51:53Z-
dc.date.issued2012en_HK
dc.identifier.citationReview Of Derivatives Research, 2012, v. 15 n. 2, p. 157-192en_HK
dc.identifier.issn1380-6645en_HK
dc.identifier.urihttp://hdl.handle.net/10722/152925-
dc.description.abstractBy using the homotopy analysis method, we derive a new explicit approximate formula for the optimal exercise boundary of American options on an underlying asset with dividend yields. Compared with highly accurate numerical values, the new formula is shown to be valid for up to 2 years of time to maturity, which is ten times longer than existing explicit approximate formulas. The option price errors computed with our formula are within a few cents for American options that have moneyness (the ratio between stock and strike prices) from 0. 8 to 1. 2, strike prices of 100 dollars and 2 years to maturity. © 2012 Springer Science+Business Media, LLC.en_HK
dc.languageengen_US
dc.publisherSpringer New York LLC. The Journal's web site is located at http://springerlink.metapress.com/openurl.asp?genre=journal&issn=1380-6645en_HK
dc.relation.ispartofReview of Derivatives Researchen_HK
dc.subjectAmerican optionsen_HK
dc.subjectHomotopy analysis methoden_HK
dc.subjectOptimal exercise boundaryen_HK
dc.titleAnalytical pricing of American optionsen_HK
dc.typeArticleen_HK
dc.identifier.emailZhang, JE: jinzhang@hku.hken_HK
dc.identifier.authorityZhang, JE=rp01125en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1007/s11147-011-9073-6en_HK
dc.identifier.scopuseid_2-s2.0-84862784794en_HK
dc.identifier.hkuros201032en_US
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-84862784794&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume15en_HK
dc.identifier.issue2en_HK
dc.identifier.spage157en_HK
dc.identifier.epage192en_HK
dc.identifier.isiWOS:000305384300003-
dc.publisher.placeUnited Statesen_HK
dc.identifier.scopusauthoridCheng, J=7405940469en_HK
dc.identifier.scopusauthoridZhang, JE=7601346659en_HK
dc.identifier.citeulike10249271-
dc.identifier.issnl1380-6645-

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