Analytic American Option Pricing and Applications

A. Sbuelz

Research output: Working paperDiscussion paperOther research output

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Abstract

I use a convenient value breakdown in order to obtain analytic solutions for finitematurity American option prices.Such a barrier-option-based breakdown yields an analytic lower bound for the American option price, which is as price-tight as the Barone-Adesi and Whaley (1987) analytic value proxy for short and medium maturities and exhibits good convergence to the Merton (1973) perpetual option price for large maturities.
Original languageEnglish
Place of PublicationTilburg
PublisherFinance
Number of pages13
Volume2003-64
Publication statusPublished - 2003

Publication series

NameCentER Discussion Paper
Volume2003-64

Fingerprint

American option pricing
Option prices
Breakdown
Maturity
American options
Barrier options
Lower bounds

Keywords

  • option pricing
  • financial markets

Cite this

Sbuelz, A. (2003). Analytic American Option Pricing and Applications. (CentER Discussion Paper; Vol. 2003-64). Tilburg: Finance.
Sbuelz, A. / Analytic American Option Pricing and Applications. Tilburg : Finance, 2003. (CentER Discussion Paper).
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Sbuelz, A 2003 'Analytic American Option Pricing and Applications' CentER Discussion Paper, vol. 2003-64, Finance, Tilburg.

Analytic American Option Pricing and Applications. / Sbuelz, A.

Tilburg : Finance, 2003. (CentER Discussion Paper; Vol. 2003-64).

Research output: Working paperDiscussion paperOther research output

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AB - I use a convenient value breakdown in order to obtain analytic solutions for finitematurity American option prices.Such a barrier-option-based breakdown yields an analytic lower bound for the American option price, which is as price-tight as the Barone-Adesi and Whaley (1987) analytic value proxy for short and medium maturities and exhibits good convergence to the Merton (1973) perpetual option price for large maturities.

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Sbuelz A. Analytic American Option Pricing and Applications. Tilburg: Finance. 2003. (CentER Discussion Paper).