An Alternative Approach to the Valuation of American Options and Applications
Author | : In-Moo Kim |
Publisher | : |
Total Pages | : |
Release | : 1999 |
ISBN-10 | : OCLC:1291267677 |
ISBN-13 | : |
Rating | : 4/5 (77 Downloads) |
Download or read book An Alternative Approach to the Valuation of American Options and Applications written by In-Moo Kim and published by . This book was released on 1999 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we examine the structure of American option valuation problems and derive analytic valuation formulas under general underlying security price processes by an alternative but intuitive method. For alternative diffusion processes, we derive quot;closed formquot; analytic valuation formulas and analyze the implications of asset price dynamics on the early exercise premiums of American options. In this regard, we introduce useful and interesting diffusion processes into American option pricing literature, thus providing a wide range of choices of pricing models for various American-type derivative assets. This work offers a useful analytic framework for future empirical testing and practical applications.