Numerical evaluation of the critical price and American options

Walter Allegretto, Giovanni Barone-Adesi and Robert Elliott

The European Journal of Finance, 1995, vol. 1, issue 1, 69-78

Abstract: An approximate solution to the American put value is proposed and implemented numerically. Relaxation techniques enable the critical price to be determined with high accuracy. The method uses a modification of the quadratic approximation of MacMillan and Barone-Adesi and Whaley which gives an expression for the critical price. Numerical experimentation and iterative methods quickly provide highly accurate solutions.

Keywords: American options; critical price; numerical appoximations (search for similar items in EconPapers)
Date: 1995
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Citations: View citations in EconPapers (7)

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DOI: 10.1080/13518479500000009

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