Integral representation of vega for American put options

Yanchu Liu, Zhenyu Cui and Ning Zhang

Finance Research Letters, 2016, vol. 19, issue C, 204-208

Abstract: There is an inaccurate formula in Huang et al. (1996). In fact, a substantial term is missing in their equation (14) for computing the value of an important option hedging parameter, i.e., the vega. We fix it in this note by providing its correct form and characterizing an associated (new) integral equation. Some related explanations and arguments are also corrected.

Keywords: American put options; Vega; Exercise boundary; Integral equation (search for similar items in EconPapers)
JEL-codes: C63 G13 G32 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:19:y:2016:i:c:p:204-208

DOI: 10.1016/j.frl.2016.07.013

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