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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Persistent link: https://EconPapers.repec.org/RePEc:wly:jfutmk:v:36:y:2016:i:9:p:887-901
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