IDEAS home Printed from https://ideas.repec.org/a/eee/phsmap/v355y2005i1p152-157.html
   My bibliography  Save this article

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

Author

Listed:
  • Bermin, Hans-Peter
  • Kohatsu-Higa, Arturo
  • Perelló, Josep

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.

Suggested Citation

  • Bermin, Hans-Peter & Kohatsu-Higa, Arturo & Perelló, Josep, 2005. "Hints for an extension of the early exercise premium formula for American options," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 355(1), pages 152-157.
    • Handle: RePEc:eee:phsmap:v:355:y:2005:i:1:p:152-157
    DOI: 10.1016/j.physa.2005.02.077
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0378437105002876
    Download Restriction: Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000
    File URL: https://libkey.io/10.1016/j.physa.2005.02.077?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Tomonori Nakatsu, 2017. "An Integration by Parts Type Formula for Stopping Times and its Application," Methodology and Computing in Applied Probability, Springer, vol. 19(3), pages 751-773, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:phsmap:v:355:y:2005:i:1:p:152-157. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.