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| Author: | AitSahlia, F. Lai, T. L. |
| Title: | Exercise boundaries and efficient approximations to American option prices and hedge parameters |
| Journal: | Journal of Computational Finance
2001 : SUMMER, VOL. 4:4, p. 85-103 |
| Index terms: | OPTIONS OPTION PRICES OPTION VALUATION MATHEMATICAL MODELS |
| Language: | eng |
| Abstract: | A new numerical method to solve the integral equation defining the early exercise boundary of an American option is presented. It is shown that the early exercise boundaries of standard American options are well approximated by linear spline with a few knots, implying that the new solution method can actually be carried out on a coarse grid of time points with reasonable accuracy. |
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