A Simple Technique for the Valuation and Hedging of American Options

The value and hedge ratio of an American-style option are shown to be closely approximated by a simple quadratic formula. The technique requires the estimation of the values and hedge ratios of just two options: a European option and a twice-exercisable option. These can be computed instantaneously, and hence the American values and hedge ratios can be rapidly computed for a large book options with little computational effort

Year of publication:	[1998]
Authors:	Ho, T. S.
Other Persons:	Stapleton, Richard C. (contributor) ; Subrahmanyam, Marti G. (contributor)
Publisher:	[1998]: [S.l.] : SSRN
Description of contents:	Abstract [papers.ssrn.com]

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