Português
Ciência-IUL
Publications
Publication Detailed Description
Valuing American-style options under the CEV model: an integral representation based method
Journal Title
Review of Derivatives Research
Year (definitive publication)
2020
Language
English
Country
United States of America
More Information
Web of Science®
Scopus
Google Scholar
Abstract
This article derives a new integral representation of the early exercise boundary for valuing American-style options under the constant elasticity of variance (CEV) model. An important feature of this novel early exercise boundary characterization is that it does not involve the usual (time) recursive procedure that is commonly employed in the so-called integral representation approach well known in the literature. Our non-time recursive pricing method is shown to be analytically tractable under the local volatility CEV process and the numerical experiments demonstrate its robustness and accuracy.
Acknowledgements
--
Keywords
CEV model,Option pricing,American-style options,Early exercise boundary,Iterative method
Fields of Science and Technology Classification
- Economics and Business - Social Sciences
Funding Records
| Funding Reference | Funding Entity |
|---|---|
| UID/GES/00315/2013 | Fundação para a Ciência e Tecnologia |
