Is anyone aware of a paper or B.Sc/M.Sc. thesis that derives the Barone-Adesi-Whaley approximation for American options with deterministic rate, dividend and volatility term structures? I have googled but without much luck as yet.

I may be able to derive this myself, but if the work has been done before then that is easier of course.

  • $\begingroup$ Hey:) Have you found an answer to your question in the mean time? I started to ask myself the same question recently. Dividend yield and volatility play such a passive role in the derivation that I doubt something breaks when they vary deterministically over time? $\endgroup$
    – Kevin
    Sep 15, 2022 at 23:01
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    $\begingroup$ @Kevin Nope haven't found an answer yet. I have not really looked at the problem much lately actually. The reason I wanted to look at deterministic vol term structure is to try to generalise that to stoch vol via Hull White formula. $\endgroup$
    – user34971
    Sep 16, 2022 at 19:15
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    $\begingroup$ @Kevin Happy to talk about this more using other channels. Not sure btw if dividends really play a passive role: without dividends and American call would be worth as much as an European call. $\endgroup$
    – user34971
    Sep 16, 2022 at 19:22
  • $\begingroup$ Hi Frido, thank you! Let me send you a direct text. But you caught me with the dividend yield and the call option. I was (by default) thinking about an American put option with positive interest rates. $\endgroup$
    – Kevin
    Sep 16, 2022 at 19:38


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