https://scholars.lib.ntu.edu.tw/handle/123456789/414475
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 Hsin-Hao Fu Yi-Ta Huang Chien-Ling Lo PAI-TA SHIH |
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). |
URI: | https://scholars.lib.ntu.edu.tw/handle/123456789/414475 | DOI: | 10.6545/JFS.201809_26(3).0003 |
Appears in Collections: | 財務金融學系 |
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