A Pincer Randomization Method for Valuing American Options

Kimura, Toshikazu; Suzuki, Takeyoshi

Economic Journal of Hokkaido University, 2006, 35, 61-76

Permalink : https://hdl.handle.net/2115/14861

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アクセス権	open access
URI	https://hdl.handle.net/2115/14861
タイトル	A Pincer Randomization Method for Valuing American Options
著者	e-Rad_Researcher 50143649 著者名 Kimura, Toshikazu
著者	著者名 Suzuki, Takeyoshi
言語	英語
キーワード	American options
	Valuation
	Pincer approximation
	Randomization
	Early exercise boundary
発行日	2006
出版者	Graduate School of Economics and Business Administration, Hokkaido University
収録物名	Economic Journal of Hokkaido University
巻(号)	35
ページ	61-76
抄録	For European option we can obtain their exact values by using the so-called Black-Scholes formula, whereas there is no explicit exact solution for American counterparts despite that many researchers have attempted to obtain the solution. There have been many approximation methods developed for valuing American options, but they are not inclusive because they have both drawbacks and advantages with respect to their speed and accuracy. This paper develops an interpolation or pincer approximation based on the randomization methods due to Carr (1998) and Kimura (2004), using a pair of lower and upper bounds for option values derived by the Theta property. From numerical comparisons with other approximations, we see that our approximation has sufficient accuracy and efficiency for practical applications. (JEL G12, G13)
資源タイプ	紀要論文
出版タイプ	Version of Record
PISSN	0916-4650
NCID	AA10772967