An efficient binomial method for pricing¶American options |
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Authors: | Marcellino Gaudenzi Flavio Pressacco |
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Institution: | 1.Dipartimento di Finanza dell'Impresa e dei Mercati Finanziari, University of Udine?e-mail: gaudenzi@uniud.it; Flavio.Pressacco@dfimf.uniud.it,IT |
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Abstract: | We present a new method for obtaining fast and accurate estimates of the price of an American put option by binomial trees.
The method is based on the interpolation of suitable values obtained by modifying the contractual strike. A time-saving procedure
allows us to derive all the interpolating data from a unique standard backward procedure.
Received: 16 July 2001 / Accepted: 19 April 2002
{The authors would like to thank an anonymous referee for helpful comments. We also thank Antonino Zanette for his help in
the refinements of the numerical procedures. |
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Keywords: | Mathematics Subject Classification (2000): 91B28 |
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