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Article: Pricing and hedging american options analytically: A perturbation method
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TitlePricing and hedging american options analytically: A perturbation method
 
AuthorsZhang, JE1
Li, T2
 
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
 
CitationMathematical Finance, 2010, v. 20 n. 1, p. 59-87 [How to Cite?]
DOI: http://dx.doi.org/10.1111/j.1467-9965.2009.00389.x
 
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.
 
ISSN0960-1627
2012 Impact Factor: 1.0
2012 SCImago Journal Rankings: 1.593
 
DOIhttp://dx.doi.org/10.1111/j.1467-9965.2009.00389.x
 
ReferencesReferences in Scopus
 
DC FieldValue
dc.contributor.authorZhang, JE
 
dc.contributor.authorLi, T
 
dc.date.accessioned2010-09-06T09:06:48Z
 
dc.date.available2010-09-06T09:06:48Z
 
dc.date.issued2010
 
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.
 
dc.description.naturepostprint
 
dc.identifier.citationMathematical Finance, 2010, v. 20 n. 1, p. 59-87 [How to Cite?]
DOI: http://dx.doi.org/10.1111/j.1467-9965.2009.00389.x
 
dc.identifier.citeulike6564081
 
dc.identifier.doihttp://dx.doi.org/10.1111/j.1467-9965.2009.00389.x
 
dc.identifier.eissn1467-9965
 
dc.identifier.epage87
 
dc.identifier.hkuros168635
 
dc.identifier.issn0960-1627
2012 Impact Factor: 1.0
2012 SCImago Journal Rankings: 1.593
 
dc.identifier.issue1
 
dc.identifier.openurl
 
dc.identifier.scopuseid_2-s2.0-74949140698
 
dc.identifier.spage59
 
dc.identifier.urihttp://hdl.handle.net/10722/85579
 
dc.identifier.volume20
 
dc.languageeng
 
dc.publisherWiley-Blackwell Publishing, Inc.. The Journal's web site is located at http://www.wiley.com/bw/journal.asp?ref=0960-1627
 
dc.publisher.placeUnited States
 
dc.relation.ispartofMathematical Finance
 
dc.relation.referencesReferences in Scopus
 
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License
 
dc.subjectAmerican option
 
dc.subjectAnalytical formula
 
dc.subjectBlack-Scholes equation
 
dc.subjectCritical stock price
 
dc.subjectPerturbation method
 
dc.titlePricing and hedging american options analytically: A perturbation method
 
dc.typeArticle
 
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Author Affiliations
  1. The University of Hong Kong
  2. Tsinghua University