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Hints for an extension of the early exercise premium formula for American options

Bermin, Hans-Peter LU ; Kohatsu-Higa, Arturo and Perelló , Josep (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.
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author
publishing date
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
2017-08-20 05:06:56
@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},
  keyword      = {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},
  volume       = {355},
  year         = {2005},
}