Data · dataset · 2016
American option pricing by a method of error correction
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The real options approach often assumes that investment projects last indefinitely, which is an unrealistic assumption.
Description
When projects live finitely, valuation techniques from American option pricing are required. This article presents a method for pricing American options based on the first-passage approach to the problem.
The key is to correct the error associated with the price obtained from a rough first approximation. The procedure leads to a significant reduction in error corresponding to the initial approximation. As a particular case of the method proposed, we derive a closed-form approximation of the option price.
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The existence of a closed-form approximating formula (that does not involve iterative methods) keeps the computational cost low. In terms of accuracy, the method can be compared to much more sophisticated methods. A tight lower bound (given in closed form) is also provided.
The method is fast, accurate, flexible, and easy to implement. A spreadsheet suffices for practical implementation.
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Where it is published
- Repository landing page tandf.figshare.com/articles/dataset/American_option_pricing_by_a_method_of_error_… ↗
landing page · from DataCite
- DOI doi.org/10.6084/m9.figshare.1629365 ↗
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Documentation and papers
- Creative Commons Attribution 4.0 International creativecommons.org/licenses/by/4.0/legalcode ↗
license · from DataCite
- IsSupplementTo 10.1080/0013791x.2015.1136014 doi.org/10.1080/0013791x.2015.1136014 ↗
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Catalogue records · 2
- DataCite API api.datacite.org/dois/10.6084/m9.figshare.1629365 ↗
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- DataCite Commons commons.datacite.org/doi.org/10.6084/m9.figshare.1629365 ↗
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Topics
- Stated by source
- Computer and information sciences · Health sciences · Mathematics
- From keywords
- Bioinformatics and computational biology · Cancer
Related
- Possibly the same asAmerican option pricing by a method of error correction
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| DataCite | 10.6084/m9.figshare.1629365 | 12 d ago | JSON v1 |
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