Analytical American Option Pricing: The Flat-barrier Lower Bound

Alessandro Sbuelz

doi:10.1111/j.0391-5026.2004.00138.x

Analytical American Option Pricing: The Flat-barrier Lower Bound

Alessandro Sbuelz

Research output: Contribution to journal › Article › peer-review

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Abstract

In a Black and Scholes (1973) world, this paper studies the pricing performance of a closed-form lower bound to American option values based on an exercise strategy corresponding to a flat-exercise boundary. The lower bound has a simple two-step implementation akin to Barone-Adesi and Whaley (1987) formula and shows superior pricing performance in the out-of-the-money region and for long maturities.

Original language	English
Pages (from-to)	399-413
Number of pages	15
Journal	Economic Notes
Volume	33
DOIs	https://doi.org/10.1111/j.0391-5026.2004.00138.x
Publication status	Published - 2004

Keywords

American option pricing

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10.1111/j.0391-5026.2004.00138.x

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VL - 33

SP - 399

EP - 413

JO - Economic Notes

JF - Economic Notes

ER -

Analytical American Option Pricing: The Flat-barrier Lower Bound

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