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Lattice Methods for Pricing American Strangles with Two-Dimensional Stochastic Volatility Models

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  • Xuemei Gao
  • Dongya Deng
  • Yue Shan

Abstract

The aim of this paper is to extend the lattice method proposed by Ritchken and Trevor (1999) for pricing American options with one-dimensional stochastic volatility models to the two-dimensional cases with strangle payoff. This proposed method is compared with the least square Monte-Carlo method via numerical examples.

Suggested Citation

  • Xuemei Gao & Dongya Deng & Yue Shan, 2014. "Lattice Methods for Pricing American Strangles with Two-Dimensional Stochastic Volatility Models," Discrete Dynamics in Nature and Society, Hindawi, vol. 2014, pages 1-6, April.
    • Handle: RePEc:hin:jnddns:165259
    DOI: 10.1155/2014/165259
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    References listed on IDEAS

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