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A Simplified Quadrature Approach for Computing Bermudan Option Prices

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  • Jean-Guy Simonato

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  • Jean-Guy Simonato, 2016. "A Simplified Quadrature Approach for Computing Bermudan Option Prices," International Review of Finance, International Review of Finance Ltd., vol. 16(4), pages 647-658, December.
    • Handle: RePEc:bla:irvfin:v:16:y:2016:i:4:p:647-658
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    File URL: http://hdl.handle.net/10.1111/irfi.12086
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    References listed on IDEAS

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    1. Chen, Ding & Härkönen, Hannu J. & Newton, David P., 2014. "Advancing the universality of quadrature methods to any underlying process for option pricing," Journal of Financial Economics, Elsevier, vol. 114(3), pages 600-612.
    2. Duan, Jin-Chuan & Simonato, Jean-Guy, 2001. "American option pricing under GARCH by a Markov chain approximation," Journal of Economic Dynamics and Control, Elsevier, vol. 25(11), pages 1689-1718, November.
    3. Merton, Robert C., 1976. "Option pricing when underlying stock returns are discontinuous," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 125-144.
    4. Sullivan, Michael A, 2000. "Valuing American Put Options Using Gaussian Quadrature," The Review of Financial Studies, Society for Financial Studies, vol. 13(1), pages 75-94.
    5. Simonato, Jean-Guy, 2011. "Computing American option prices in the lognormal jump–diffusion framework with a Markov chain," Finance Research Letters, Elsevier, vol. 8(4), pages 220-226.
    6. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    7. Jin‐Chuan Duan, 1995. "The Garch Option Pricing Model," Mathematical Finance, Wiley Blackwell, vol. 5(1), pages 13-32, January.
    8. Broadie, Mark & Detemple, Jerome, 1996. "American Option Valuation: New Bounds, Approximations, and a Comparison of Existing Methods," The Review of Financial Studies, Society for Financial Studies, vol. 9(4), pages 1211-1250.
    9. D. Andricopoulos, Ari & Widdicks, Martin & Newton, David P. & Duck, Peter W., 2007. "Extending quadrature methods to value multi-asset and complex path dependent options," Journal of Financial Economics, Elsevier, vol. 83(2), pages 471-499, February.
    10. San‐Lin Chung & Kunyi Ko & Mark B. Shackleton & Chung‐Ying Yeh, 2010. "Efficient quadrature and node positioning for exotic option valuation," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 30(11), pages 1026-1057, November.
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    Cited by:

    1. Jin-Yu Zhang & Wen-Bo Wu & Yong Li & Zhu-Sheng Lou, 2021. "Pricing Exotic Option Under Jump-Diffusion Models by the Quadrature Method," Computational Economics, Springer;Society for Computational Economics, vol. 58(3), pages 867-884, October.
    2. Cosma, Antonio & Galluccio, Stefano & Pederzoli, Paola & Scaillet, Olivier, 2020. "Early Exercise Decision in American Options with Dividends, Stochastic Volatility, and Jumps," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 55(1), pages 331-356, February.
    3. Denault, Michel & Simonato, Jean-Guy, 2022. "A note on a dynamic goal-based wealth management problem," Finance Research Letters, Elsevier, vol. 46(PB).

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