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We introduce a new analytical approach to price American options. Using an explicit and intuitive proxy for the exercise rule, we derive tractable pricing formulas using a short-maturity asymptotic expansion. Depending on model parameters, this method can accurately price options with...
Persistent link: https://www.econbiz.de/10005857779
free of the unobserved spot volatility. Therefore, the model can be calibrated on option data pooled across different …
Persistent link: https://www.econbiz.de/10005858590