Pricing American Options - an Important Fundamental Research in ...
Pricing American Options - an Important Fundamental Research in ...
Pricing American Options - an Important Fundamental Research in ...
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Examples <strong>an</strong>d Discussion<br />
Example 3:<br />
This is the same example used <strong>in</strong> Bunch <strong>an</strong>d Johnson (2000),<br />
except with a very long life time.<br />
Strike price X = $100,<br />
Risk-free <strong>in</strong>terest rate r = 0.01,<br />
Volatility σ = 0.2,<br />
Time to expiration T = 40 (years),<br />
In terms of the dimensionless variables, the two parameters<br />
<strong>in</strong>volved are<br />
Relative risk-free <strong>in</strong>terest rate γ = 0.5,<br />
Dimensionless time to expiration τ exp = 0.4.<br />
IWIF-II www.sw<strong>in</strong>gtum.com/<strong>in</strong>stitute/IWIF PPT 65/68<br />
Song-P<strong>in</strong>g Zhu, SMAS, April 26, 2007 0-64
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