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Knock‐in American options
Author(s) -
Dai Min,
Kwok Yue Kuen
Publication year - 2004
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.10101
Subject(s) - valuation (finance) , stock options , stock price , call option , valuation of options , strike price , binary option , economics , black–scholes model , exotic option , actuarial science , put option , financial economics , mathematical economics , econometrics , asian option , finance , series (stratigraphy) , volatility (finance) , paleontology , biology
A knock‐in American option under a trigger clause is an option contract in which the option holder receives an American option conditionalon the underlying stock price breaching a certain trigger level (also called barrier level). We present analytic valuation formulas forknock‐in American options under the Black‐Scholes pricing framework. The price formulas possess different analytic representations,depending on the relation between the trigger stock price level and the critical stock price of the underlying American option. We also performednumerical valuation of several knock‐in American options to illustrate the efficacy of the price formulas. © 2004 Wiley Periodicals, Inc.Jrl Fut Mark 24:179–192, 2004