Early exercise boundary for American type of floating strike Asian option and its numerical approximation

Economy – Quantitative Finance – Pricing of Securities

Scientific paper

Rate now

  [ 0.00 ] – not rated yet Voters 0   Comments 0

Details

25 pages

Scientific paper

In this paper we generalize and analyze the model for pricing American-style Asian options due to (Hansen and Jorgensen 2000) by including a continuous dividend rate $q$ and a general method of averaging of the floating strike. We focus on the qualitative and quantitative analysis of the early exercise boundary. The first order Taylor series expansion of the early exercise boundary close to expiry is constructed. We furthermore propose an efficient numerical algorithm for determining the early exercise boundary position based on the front fixing method. Construction of the algorithm is based on a solution to a nonlocal parabolic partial differential equation for the transformed variable representing the synthesized portfolio. Various numerical results and comparisons of our numerical method and the method developed by (Dai and Kwok 2006) are presented.

No associations

LandOfFree

Say what you really think

Search LandOfFree.com for scientists and scientific papers. Rate them and share your experience with other people.

Rating

Early exercise boundary for American type of floating strike Asian option and its numerical approximation does not yet have a rating. At this time, there are no reviews or comments for this scientific paper.

If you have personal experience with Early exercise boundary for American type of floating strike Asian option and its numerical approximation, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and Early exercise boundary for American type of floating strike Asian option and its numerical approximation will most certainly appreciate the feedback.

Rate now

     

Profile ID: LFWR-SCP-O-243911

  Search
All data on this website is collected from public sources. Our data reflects the most accurate information available at the time of publication.