Unlike European-type derivative securities, there are no simple analytic valuation formulas for American options, even when the underlying asset price has constant volatility. The early exercise feature considerably complicates the valuation of American contracts. The strategy taken in this...

In this paper, we consider American option contracts when the underlying asset has stochastic dividends and stochastic volatility. We provide a full discussion of the theoretical foundations of American option valuation and exercise boundaries. We show how they depend on the various sources of...