Asymptotic analysis of American call options英文文献资料.docVIP

PII.S0161171201005701 ASYMPTOTICANALYSISOFAMERICANCALLOPTIONS GHADA ALOBAIDI andROLAND MALLIER (Received 7August 2000) Abstract. American call options are ?nancial derivatives that give the holder the right butnottheobligation tobuyanunderlying security atapre-determined price. Theydi?er from European options inthattheymaybeexercised atanytimeprior totheirexpiration, rather than only atexpiration. Their value isdescribed bythe Black-Scholes PDE together with a constraint that arises from the possibility of early exercise. This leads to a free boundary problem for the optimal exercise boundary, which determines whether or not itisbene?cial forthe holder toexercise the option prior toexpiration. However, anexact solution cannot befound, and therefore byusing asymptotic techniques employed inthe study of boundary layers in ?uid mechanics, we ?nd an asymptotic expression for the location ofthe optimal exercise boundary and the value ofthe option near toexpiration. 2000 Mathematics Subject Classi?cation. 91B28, 41A58. 1. Introduction. Recently, the?nancial markets haveseenanexplosion of“deriv- ativeproducts”suchasoptions.Anoptionisacontractthatallowstheholdertobuy orsell a?nancial asset ata?xed price inthe future. Options need not beexercised, the holder of the option will use it only if this is convenient. A call is an option to buyanassetandaputisanoptiontosellit.Anoptioncontractspeci?estheexercise priceandtheexpiration dateofthecontract. Suchoptionsexistonmanyassets(knownasunderlyers).Optionsareaspecialtype ofderivativesecuritybecausetheirvalueisderivedfromthevalueofsomeunderlying security.Mostoptionscanbegroupedintoeitheroftwocategories:Europeanoptions whichcanbeexercisedonlyontheirexpirationdate,andAmericanoptionswhichcan beexercisedonorbeforetheirexpirationdate.Inpractice,mostoptionsareAmerican. American options aremuchharder todealwiththanEuropean ones.Theproblem is that it may be optimal to use (exercise) the option before the ?nal expiry date