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On the American option‐pricing model with an uncertain volatility
Author(s) -
Yin HongMing,
Wang Wen
Publication year - 2016
Publication title -
mathematical methods in the applied sciences
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.719
H-Index - 65
eISSN - 1099-1476
pISSN - 0170-4214
DOI - 10.1002/mma.3509
Subject(s) - valuation of options , volatility (finance) , stochastic volatility , implied volatility , volatility smile , economics , call option , econometrics , asian option , financial economics , sabr volatility model , put option , finite difference methods for option pricing , black–scholes model
In this paper, we study an American option‐pricing model with an uncertain volatility. Some properties for the option price are derived. Particularly, a global spread for the option price is proved when the volatility depends on the underlying security and time. This result confirms the observed fact from the real financial data in option markets. Copyright © 2015 John Wiley & Sons, Ltd.