A simple and numerically efficient valuation method for American puts using a modified Geske-Johnson approach

Article Abstract:

Geske and Johnson (1984) develop an equation for the American put price and obtain accurate prices using a method requiring quadrivariate normal integrals evaluated over an interval containing four equally spaced exercise points. We show that a modification of their method which uses optimal placement of exercise points yields in most cases accurate values using nothing more than bivariate normals. In the more difficult (deep-in-the-money) cases, trivariate normals suffice. (Reprinted by permission of the publisher.)

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The pricing of options with default risk

Article Abstract:

This paper considers the pricing of options with default risk. The comparative statics of such options can differ from those of ordinary options, and early exercise of such American call options can be optimal. Several examples of options with default risk are considered. (Reprinted by permission of the publisher.)

Default (Finance)

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The American put option and its critical stock price

Article Abstract:

An expression is presented for the American put option critical stock price. Components include expressing put price as a first-passage probability integral, consideration of the finite-lived case, and calculations for put value based on time and the European put option with early-exercise premium.

United States, Stock Options, Statistical Data Included, Methods, Analysis, Evaluation, Stocks, Executive compensation, Stock price forecasting

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