# Questions tagged [american-options]

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### Put price characterisation

I am reading Shreve's Stochastic Calculus for Finance II: Continuous-Time Models. I am trying to understand the below two concepts: Topic 8.3.3 Analytical Characterization of the Put price on Page ...
• 11
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### Does Put-Call parity have influence over American Option pricing in practice?

I am learning my options and from what I read it seems that put-call parity is regarded as only being applicable to European options because the time to exercise is known. American options, on the ...
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### Binomial Tree for CDF

I'm tasked with solving an optimal stopping problem relating to stochastic process representing a firms profit namely $X_t = X_0 + \mu t + \sigma Wt$ where $X_0, \mu$ and $\sigma$ are constants. ...
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### What are some good books to get started with option theory? [duplicate]

Recently graduated in econometrics but starting to realize my knowledge is limited. Any and all tips are welcome!
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### Perpetual Option Paying Chooser Option

A perpetual option solves the ODE $$rSV_S+\frac{1}{2}\sigma^2S^2V_{SS}-rV=0$$ The general solution is $$V(S)=aS+bS^{\gamma}$$ where $\gamma=-\frac{2r}{\sigma^2}<0$. For an American put option with ...
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### Why do we worry about the bid/ask spread when pricing option in incomplete market?

Several resources I saw introduce the notion of bid/ask spread when trying to price options in incomplete market, I don't understand why the notion is introduced since we are interested on the price ...
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1 vote
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### Is there a closed form solution to calculate Fugit for stock options?

I am trying to find a quick and dirty way to estimate fugit for a basket of American options real time. Is there a quick way to provide a proxy? I know one can do binomial tree or monte carlos ...
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### How to compute the price range for an American call and put option?

A non dividend paying stock has the following details for its European option: Time to expiry – 1 year, Risk free interest (Continuous)- 5%, Exercise price = 42, Current Stock Price = 40, Call option=...
1 vote
59 views

### What is the optimal time for exercising American call and put option?

A 9 month American option (underlying) is known to pay dividend of USD 1 and USD 0.75 at the end of the ...
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### How to get forward curve from American options

I am curious about how one could derive the forward price for a given tenor when dealing with American options? Since with American options put/call parity is only an inequality that must be satisfied,...
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1 vote
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### What does the theta curve of an american option look like?

Is the theta decay curve you see often given around the internet below in fact valid for American-style options? Often times, calculations for European-style options (Black-Scholes) are passed off as ...
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1 vote
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### Local vol vs stochastic vol in the context of American digital options

I have two models of some spot. One is under local vol and the other is under stoch vol. Both are calibrated to the prevailing vanilla prices. I then consider the option that pays $1$ if the spot ...
• 595
1 vote
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### Longstaff and Schwartz example in their paper

I was looking at the well known Longstaff and Schwartz paper "Valuing American Options by Simulation: A Simple Least-Squares Approach". There are a couple of examples where they applied the ...
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1 vote
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### Extracting implied dividends from American options

I am using end of day options data and want to extract discrete dividend information contained in the option prices. I am doing this for ETFs like SPY where I know the dividend schedule. These are the ...
139 views

### How to price a Perpetual American Put Option with the Binomial Tree Model?

How do we price an American Put Option with simplified assumptions of non-zero interest rate but zero volatility and zero dividend rate? I understand the concept of Perpetual American Options and I ...
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### Why might Implied Volatility continue stay elevated even after binary event?

After the Georgia Senate runoff results were called today (Jan. 6, 2021), I had expected the IV on many election-related tickers to fall. In other words, I thought a major IV crush was in the cards. ...
• 151
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### FX American call option optimal exercise and holding region

Problem I am considering an American call option which gives a domestic investor the right to buy a unit of foreign currency at a strike of $K$ units of domestic currency. I have an exchange rate $S_t$...
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1 vote
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### Practical implementation of Vellekoop-Nieuwenhuis model/interpolation

Have read the 2006 VELLEKOOP-NIEUWENHUIS paper (Efficient Pricing of Derivatives on Assets with Discrete Dividends) (Download) many times re Discrete dividends on American Options, but remain baffled ...
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### Constructor error pricing american ops with divs quantlib?

Looking at post from Issue Using QuantLib and Python to Calculate Price and Greeks for American Option With Discrete Dividends and trying to recreate the result; but getting a constructor error I ...