|Title:||Analytical Approximations for American Options: The Binary Power Option Approach||Other Titles:||美式選擇權之解析近似：二元乘冪選擇權法||Authors:||Mi-Hsiu Chiang
|Issue Date:||Sep-2018||Journal Volume:||26||Journal Issue:||3||Start page/Pages:||91||Source:||財務金融學刊||Abstract:||
This study proposes an innovative approach to value American options. Using a portfolio of binary power options to replicate the early exercise premium, we modify Medvedev and Scaillet (2010) to derive an analytical approximation of American option values under the Black-Scholes framework. Compared with Medvedev and Scaillet (2010), our approach provides a much simpler functional form of the early exercise premium that can be easily extended to high-order series expansions. The numerical results show that the pricing performance of our method is closely comparable to that of Medvedev and Scaillet (2010) and superior to that of Barone-Adesi and Whaley (1987).
|Appears in Collections:||財務金融學系|
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