A Generalization of the Recursive Integration Method for the Analytic Valuation of American Options

Lung Fu Chang*, Jia-Hau Guo, Mao Wei Hung

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

Abstract

This article provides a general accelerated recursive integration method for pricing American options based on stochastic volatility and double jump processes. Our proposed model is a generalization of the recursive integral representation method. American option prices can be evaluated by the sum of a corresponding European option price and an early exercise premium integral. Numerical results show that our proposed method is efficient and accuracy in pricing American options with stochastic volatility and double jump processes.

Original languageEnglish
Pages (from-to)887-901
Number of pages15
JournalJournal of Futures Markets
Volume36
Issue number9
DOIs
StatePublished - 1 Sep 2016

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