A generalization of the Barone‐Adesi and Whaley approach for the analytic approximation of American options

Jia‐Hau Guo, Mao‐Wei Hung and Leh‐Chyan So

Journal of Futures Markets, 2009, vol. 29, issue 5, 478-493

Abstract: This article introduces a general quadratic approximation scheme for pricing American options based on stochastic volatility and double jump processes. This quadratic approximation scheme is a generalization of the Barone‐Adesi and Whaley approach and nests several option models. Numerical results show that this quadratic approximation scheme is efficient and useful in pricing American options. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 29:478–493, 2009

Date: 2009
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