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.
|Place of Publication||Tilburg|
|Number of pages||13|
|Publication status||Published - 2003|
|Name||CentER Discussion Paper|
- option pricing
- financial markets