REFINING THE QUADRATIC APPROXIMATION FORMULA FOR AN AMERICAN OPTION

Woon Kwong Wong and Kai Xu ()
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Woon Kwong Wong: Department of Mathematics, National University of Singapore, 117543, Singapore
Kai Xu: Department of Mathematics, National University of Singapore, 117543, Singapore

International Journal of Theoretical and Applied Finance (IJTAF), 2001, vol. 04, issue 05, 773-781

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.

Keywords: American options; quadratic approximation form (search for similar items in EconPapers)
Date: 2001
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DOI: 10.1142/S0219024901001243

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