A recent empirical study (Constantinides et al, 2011) argues that S&P 500 Index call options are frequently overpriced in the sense that any rational agent can improve her expected utility by writing these calls. Little work has addressed why such apparent mispricing is so common. For the first...

This paper proposes an innovative algorithm that significantly improves on the approximation of the optimal early exercise boundary obtained with simulation based methods for American option pricing. The method works by exploiting and leveraging the information in multiple cross-sectional...