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Refining The Quadratic Approximation Formula For An American Option

Author

Listed:
  • WOON KWONG WONG

    (Department of Mathematics, National University of Singapore, 117543, Singapore)

  • KAI XU

    (Department of Mathematics, National University of Singapore, 117543, Singapore)

Abstract

The aim of this paper is to provide a more refined approximation for the valuation of an American option, based on the quadratic approximation method. We not only show that the result using the old method is the special case of our method, but also investigate the qualitative behavior of American options with respect to a certain new parameter.

Suggested Citation

  • Woon Kwong Wong & Kai Xu, 2001. "Refining The Quadratic Approximation Formula For An American Option," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 4(05), pages 773-781.
    • Handle: RePEc:wsi:ijtafx:v:04:y:2001:i:05:n:s0219024901001243
    DOI: 10.1142/S0219024901001243
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