Hints for an extension of the early exercise premium formula for American options
(2005) In Physica A: Statistical Mechanics and its Applications 355(1). p.152-157- Abstract
- There exists a non-closed formula for the American put option price and non-trivial computations are required to solve it. Strong efforts have been made to propose efficient numerical techniques but few have strong mathematical reasoning to ascertain why they work well. We present an extension of the American put price aiming to catch weaknesses of the numerical methods based on their non-fulfillment of the smooth pasting condition.
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/9f131996-eb28-4287-98c9-206638d63372
- author
- Bermin, Hans-Peter LU ; Kohatsu-Higa, Arturo and Perelló, Josep
- publishing date
- 2005-09
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- econophysics, American put option, computational methods, Black-Scholes, option pricing
- in
- Physica A: Statistical Mechanics and its Applications
- volume
- 355
- issue
- 1
- pages
- 6 pages
- publisher
- Elsevier
- external identifiers
-
- scopus:21444450866
- ISSN
- 0378-4371
- DOI
- 10.1016/j.physa.2005.02.077
- language
- English
- LU publication?
- no
- id
- 9f131996-eb28-4287-98c9-206638d63372
- date added to LUP
- 2017-01-21 17:37:46
- date last changed
- 2022-01-30 17:16:34
@article{9f131996-eb28-4287-98c9-206638d63372, abstract = {{There exists a non-closed formula for the American put option price and non-trivial computations are required to solve it. Strong efforts have been made to propose efficient numerical techniques but few have strong mathematical reasoning to ascertain why they work well. We present an extension of the American put price aiming to catch weaknesses of the numerical methods based on their non-fulfillment of the smooth pasting condition.}}, author = {{Bermin, Hans-Peter and Kohatsu-Higa, Arturo and Perelló, Josep}}, issn = {{0378-4371}}, keywords = {{econophysics; American put option; computational methods; Black-Scholes; option pricing}}, language = {{eng}}, number = {{1}}, pages = {{152--157}}, publisher = {{Elsevier}}, series = {{Physica A: Statistical Mechanics and its Applications}}, title = {{Hints for an extension of the early exercise premium formula for American options}}, url = {{http://dx.doi.org/10.1016/j.physa.2005.02.077}}, doi = {{10.1016/j.physa.2005.02.077}}, volume = {{355}}, year = {{2005}}, }