This paper presents a new transform-based approach for path-independent lattice construction for pricing American options under low-dimensional stochastic volatility models. We derive multidimensional transforms which allow us to construct efficient path-independent lattices for virtually all...

This paper demonstrates how to value American interest rate options under the jump extended constant-elasticity-of-variance (CEV) models. We consider both exponential jumps (see Duffie, Pan, and Singleton (2000)) and lognormal jumps (see Johannes (2004)) in the short rate process. We show how to...

This paper considers Merton's (1973) model for partial equilibrium bond option pricing when stochastic bond price processes are involved. A log-normal process with a stochastic drift is suggested that allows the price of a pure discount bond to converge to its face value upon maturity. The...