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
analyst report

Risk.net Beyond LIBOR Special Report 2018

analyst report

Greenwich Associates - Technology Opening Doors for Fixed-Income Dealers

white paper

The 5 Top-of-Mind Issues Dominating the LIBOR Transition

newsletter issue - Oct 11, 2018

Thinking Derivatively - October 2018 Issue

written blog

Why We're Putting Front-Office Risk Transformation Into Focus

industry conference

Equity-Based Insurance Guarantees Conference 2018

newsletter issue - Sep 5, 2018

Thinking Derivatively - September 2018 Issue

written blog

Real Time Demands and other Forces Spark Growth of Electronification: Experts Say

white paper

Adapting to Change in the Electronic Fixed Income and OTC Markets: Have We Reached an Inflection...

written blog

CEO Spotlight: Mazy Dar, OpenFin

news - article pdf - Aug 28, 2018

The Technology Headlines August 2018 | Numerix Featured on Cover of The Technology Headlines

news - article pdf - Aug 28, 2018

The Technology Headlines August 2018 | Numerix