Pricing the American Feature

Carl Chiarella, Xuezhong (Tony) He () and Christina Sklibosios Nikitopoulos
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Christina Sklibosios Nikitopoulos: University of Technology Sydney

Chapter Chapter 16 in Derivative Security Pricing, 2015, pp 349-369 from Springer

Abstract: Abstract To Option pricing American style understand the problems and techniques of pricing the American feature of an option, this chapter introduces the American option pricing problem from the conventional approach based on compound options and the free boundary value problem which can be solved by using either the Fourier transform technique or a simple approximation procedure. The framework developed is readily extended to other option pricing problems.

Keywords: Free Boundary Value Problem; American Options; Compound Option; Simple Estimation Procedure; Critical Stock Price (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:spr:dymchp:978-3-662-45906-5_16

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DOI: 10.1007/978-3-662-45906-5_16

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