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A Generalization of the Recursive Integration Method for the Analytic Valuation of American Options

Lung‐Fu Chang, Jia‐Hau Guo and Mao‐Wei Hung

Journal of Futures Markets, 2016, vol. 36, issue 9, 887-901

Abstract: This article provides a general accelerated recursive integration method for pricing American options based on stochastic volatility and double jump processes. Our proposed model is a generalization of the recursive integral representation method. American option prices can be evaluated by the sum of a corresponding European option price and an early exercise premium integral. Numerical results show that our proposed method is efficient and accuracy in pricing American options with stochastic volatility and double jump processes. © 2015 Wiley Periodicals, Inc. Jrl Fut Mark 36:887–901, 2016

Date: 2016
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