New Bounds on American Option Prices

摘要：

In this article, we develop new upper and lower bounds on American option prices which improve the bounds by Broadie and Detemple. The main idea is the consideration of doubly capped call options which have two cap prices. We present a new option price approximation based on the two upper bounds. On average, our upper bound extrapolation (named UBE) has an average accuracy better than a 1,000 time-step binomial tree with a computation speed comparable to a 100 time-step binomial tree. We also provide a new method of approximating the optimal exercise boundaries of American options.

关键词： American option Optimal exercise boundary Approximation Bound Cap

作者: In Joon Kim Geun Hyuk Chang Suk Joon Byun

作者单位: Yonsei University Woori Bank Graduate School of Finance Korea Advanced Institute of Science and Technology

会议类型: 国际会议

会议名称: 2008年中国金融国际年会

会议地点: 大连

会议语种:英文

页码: 1-32

在线出版日期: 2008-07-02（万方平台首次上网日期，不代表论文的发表时间）