A study of the use and improvement of Hull and White's (1988) control variate technique in pricing options is provided. It contributes to the literature in two ways. First it is shown that it is not optimal to use the entire error of a control variate against its known price (usually a...

By applying Ho, Stapleton and Subrahmanyam's (1997, hereafter HSS) generalised Geske–Johnson (1984, hereafter GJ) method, this paper provides analytic solutions for the valuation and hedging of American options in a stochastic interest rate economy. The proposed method simplifies HSS's...

This paper utilizes the static hedge portfolio (SHP) approach of Derman et al. [Derman, E., Ergener, D., Kani, I., 1995. Static options replication. Journal of Derivatives 2, 78-95] and Carr et al. [Carr, P., Ellis, K., Gupta, V., 1998. Static hedging of exotic options. Journal of Finance 53,...

In contrast to the constant exercise boundary assumed by Broadie and Detemple (1996) [Broadie, M., Detemple, J., 1996. American option valuation: New bounds, approximations, and comparison of existing methods. Review of Financial Studies 9, 1211-1250], we use an exponential function to...

This paper derives the pricing bounds of a currency cross-rate option using the option prices of two related dollar rates via a copula theory and presents the analytical properties of the bounds under the Gaussian framework. Our option pricing bounds are useful, because (1) they are general in...

This paper generalizes the seminal Cox-Ross-Rubinstein (CRR) binomial model by adding a stretch parameter. The generalized CRR (GCRR) model allows us to fine-tune (via the stretch parameter) the lattice structure so as to efficiently price a range of options, such as barrier options. Our...

This paper extends the static hedging portfolio (SHP) approach of Derman et al. (1995) and Carr et al. (1998) to price and hedge American knock-in put options under the Black–Scholes model and the constant elasticity of variance (CEV) model. We use standard European calls (puts) to construct...

This study extends the Hull and White (1993 J. Derivatives 1 21-31) binomial method to construct a trinomial model for the valuation of American-style options whose strike price can be reset to a new level. The reset criterion is conditioned upon the average underlying asset price hitting the...