Analytical valuation of American options on jump-diffusion processes. (Q2707165)
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scientific article
| Language | Label | Description | Also known as |
|---|---|---|---|
| English | Analytical valuation of American options on jump-diffusion processes. |
scientific article |
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29 March 2001
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jump-diffusion model
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early exercise premium
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Analytical valuation of American options on jump-diffusion processes. (English)
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This paper studies the pricing of American calls and puts in a jump-diffusion model with dividends as in \textit{R. C. Merton} [J. Financial Econ. 3, 125--144 (1976)]. It derives a number of analytic formulae (in terms of expectations) that become more explicit for lognormal or bivariate jumps. The early exercise premium turns out to be rather different from the diffusion case.
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