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Article: Pricing and hedging american options analytically: A perturbation method

TitlePricing and hedging american options analytically: A perturbation method
Authors
KeywordsAmerican option
Analytical formula
Black-Scholes equation
Critical stock price
Perturbation method
Issue Date2010
PublisherWiley-Blackwell Publishing, Inc.. The Journal's web site is located at http://www.wiley.com/bw/journal.asp?ref=0960-1627
Citation
Mathematical Finance, 2010, v. 20 n. 1, p. 59-87 How to Cite?
AbstractThis paper studies the critical stock price of American options with continuous dividend yield. We solve the integral equation and derive a new analytical formula in a series form for the critical stock price. American options can be priced and hedged analytically with the help of our critical-stock-price formula. Numerical tests show that our formula gives very accurate prices. With the error well controlled, our formula is now ready for traders to use in pricing and hedging the S&P 100 index options and for the Chicago Board Options Exchange to use in computing the VXO volatility index. © 2010 Wiley Periodicals, Inc.
Persistent Identifierhttp://hdl.handle.net/10722/85579
ISSN
2014 Impact Factor: 1.774
2014 SCImago Journal Rankings: 1.977
References

 

DC FieldValueLanguage
dc.contributor.authorZhang, JEen_HK
dc.contributor.authorLi, Ten_HK
dc.date.accessioned2010-09-06T09:06:48Z-
dc.date.available2010-09-06T09:06:48Z-
dc.date.issued2010en_HK
dc.identifier.citationMathematical Finance, 2010, v. 20 n. 1, p. 59-87en_HK
dc.identifier.issn0960-1627en_HK
dc.identifier.urihttp://hdl.handle.net/10722/85579-
dc.description.abstractThis paper studies the critical stock price of American options with continuous dividend yield. We solve the integral equation and derive a new analytical formula in a series form for the critical stock price. American options can be priced and hedged analytically with the help of our critical-stock-price formula. Numerical tests show that our formula gives very accurate prices. With the error well controlled, our formula is now ready for traders to use in pricing and hedging the S&P 100 index options and for the Chicago Board Options Exchange to use in computing the VXO volatility index. © 2010 Wiley Periodicals, Inc.en_HK
dc.languageengen_HK
dc.publisherWiley-Blackwell Publishing, Inc.. The Journal's web site is located at http://www.wiley.com/bw/journal.asp?ref=0960-1627en_HK
dc.relation.ispartofMathematical Financeen_HK
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.subjectAmerican optionen_HK
dc.subjectAnalytical formulaen_HK
dc.subjectBlack-Scholes equationen_HK
dc.subjectCritical stock priceen_HK
dc.subjectPerturbation methoden_HK
dc.titlePricing and hedging american options analytically: A perturbation methoden_HK
dc.typeArticleen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=0960-1627&volume=20&issue=1&spage=59&epage=87&date=2010&atitle=Pricing+and+hedging+American+options+analytically:+a+perturbation+methoden_HK
dc.identifier.emailZhang, JE: jinzhang@hku.hken_HK
dc.identifier.authorityZhang, JE=rp01125en_HK
dc.description.naturepostprint-
dc.identifier.doi10.1111/j.1467-9965.2009.00389.xen_HK
dc.identifier.scopuseid_2-s2.0-74949140698en_HK
dc.identifier.hkuros168635en_HK
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-74949140698&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume20en_HK
dc.identifier.issue1en_HK
dc.identifier.spage59en_HK
dc.identifier.epage87en_HK
dc.identifier.eissn1467-9965-
dc.publisher.placeUnited Statesen_HK
dc.identifier.scopusauthoridZhang, JE=7601346659en_HK
dc.identifier.scopusauthoridLi, T=8836091500en_HK
dc.identifier.citeulike6564081-

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