| Autor: |
Chalasani, Prasad, Jha, Somesh, Egriboyun, Feyzullah, Varikooty, Ashok |
| Zdroj: |
Review of Derivatives Research; Jan1999, Vol. 3 Issue 1, p85-105, 21p |
| Abstrakt: |
We present simple and fast algorithms for computing very tight upper and lower bounds on the prices of American Asian options in the binomial model. We introduce a new refined version of the Cox-Ross-Rubinstein (1979) binomial lattice of stock prices. Each node in the lattice is partitioned into ‘nodelets’, each of which represents all paths arriving at the node with a specific geometric stock price average. The upper bound uses an interpolation idea similar to the Hull-White (1993) method. From the backward-recursive upper-bound computation, we estimate a good exercise rule that is consistent with the refined lattice. This exercise rule is used to obtain a lower bound on the option price using a modification of a conditional-expectation based idea from Rogers-Shi (1995) and Chalasani-Jha-Varikooty (1998). Our algorithms run in time proportional to the number of nodelets in the refined lattice, which is smaller than n4/20 for n > 14 periods. [ABSTRACT FROM AUTHOR] |
| Databáze: |
Complementary Index |
| Externí odkaz: |
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