A generalization of the Barone‐Adesi and Whaley approach for the analytic approximation of American options | Zendy

Guo JiaHau | Zendy; Hung MaoWei | Zendy; So LehChyan | Zendy

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A generalization of the Barone‐Adesi and Whaley approach for the analytic approximation of American options

Author(s) -

Guo JiaHau,

Hung MaoWei,

So LehChyan

Publication year - 2009

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.20361

Subject(s) - generalization , quadratic equation , scheme (mathematics) , valuation of options , mathematical economics , volatility (finance) , jump , stochastic volatility , binomial options pricing model , mathematics , economics , econometrics , physics , mathematical analysis , quantum mechanics , geometry

This article introduces a general quadratic approximation scheme for pricing American options based on stochastic volatility and double jump processes. This quadratic approximation scheme is a generalization of the Barone‐Adesi and Whaley approach and nests several option models. Numerical results show that this quadratic approximation scheme is efficient and useful in pricing American options. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 29:478–493, 2009

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