THE ANALYTIC VALUATION OF AMERICAN OPTIONS

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No analytic solution exists for the valuation of American options written on futures contracts and foreign currencies for which early exercise may be optimal. This article formulates the American option valuation problem in economically and mathematically meaningful ways. This enables us to derive valuation formulas for American options. The properties associated with the optimal exercise boundary are examined, and a numerical technique to implement the valuation formulas is presented.
Publisher
OXFORD UNIV PRESS INC
Issue Date
1990
Language
English
Citation

REVIEW OF FINANCIAL STUDIES, v.3, no.4, pp.547 - 572

ISSN
0893-9454
DOI
10.1093/rfs/3.4.547
URI
http://hdl.handle.net/10203/56177
Appears in Collection
RIMS Journal Papers
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