Title: An Application of the Control-variant Approaches in the American Options Pricing
Abstract: Most of options transactions are American-type options in the world.Due to path-dependent character,it results in more complex American options pricing than European one.Black-Scholes pricing model has no analytical formula of American put options,thus it cannot get accurate solution.Some of relatively mature numerical methods cannot reasonably estimate American options.Because Monte-Carlo simulation is a forward induction procedure and boundary of American options is free,Monte-Carlo simulation is unable to correctly value American options.Binomial tree can be applied to pricing of all kinds of options,but it has a lot of flaws,such as accuracy.So when the number of step is very small,it affects the accuracy of the American options pricing.The control-variant approaches are variance reduction techniques and improve the value of American options valued by binomial tree and increase estimation accuracy.
Publication Year: 2005
Publication Date: 2005-01-01
Language: en
Type: article
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