Download this Complimentary Numerix Research

Analytic Approximation for Prices of American Options, Time-Dependent Settings, Proportional and Discrete Dividends: The Decoupled Volatility Framework

The paper introduces a fast analytic price approximations for American options on log-normal or close to log-normal underlying assets with discrete time-dependent parameters. Two types of dividends considered here are proportional and discrete - strike convention.

The paper considers pricing American options on underlyings with time-dependent (term structured) parameters in a form of analytic approximation. This subject has not been widely covered by openly available references, with a possible exception of [1] and [11]. These publications consider more general underlying assets with time- and state-dependent parameters. Addressing the problem from very different positions, they end up with the price, decomposable into a sum (possibly in infinite) of solutions to simpler problems.

Focused primarily on achieving a potentially extremely high precision in the price, these approaches, due to their nature, could not pay a sufficiend attention to other important practitioners' concerns like stability of Greeks, scalability to larger portfolios, applicability within inverse (calibration) problems as well as purely engineering issues like timing and simplicity of implementation.

Author: Yuriy Shkolnikov

Download Numerix Research Paper

Complete the form below to download this complimentary research paper.

Select Form: 

Form #5: Research

Keep me informed of future research from Numerix:

Sign me up to receive "Thinking Derivatively" monthly newsletter by Numerix:

* Required fields
quantitative research

Risk Magazine Cutting Edge Article | MVA Future IM for Client Trades and Dynamic Hedges

newsletter issue - Sep 10, 2019

Thinking Derivatively - September 2019 Issue

content collection

NEXT 365

white paper

White paper | The Transformative Impacts of the XVA State of Play

live webinar

Webinar | How to Prepare for the Next Phases of Initial Margin Requirements

newsletter issue - Aug 12, 2019

Thinking Derivatively - August 2019 Issue

info graphic

Infographic | The Top 10 Checklist for Choosing the Right Managed Services Partner

news - article pdf - Jul 31, 2019

Waters Rankings 2019 | Best Credit Risk Solution Provider

conference

Sibos 2019

video blog

Managed Services

video blog

Accelerate Your LIBOR Transition

conference

QuantMinds Americas 2019