We propose a dynamic programming (DP) approach for pricing American options over a finite time horizon. We model uncertainty in stock price that follows geometric Brownian motion (GBM) and let interest rate and volatility be fixed. A procedure based on dynamic programming combined with piecewise linear interpolation approximation is developed to price the value of options. And we introduce the free boundary problem into our model. Numerical experiments illustrate the relation between value of option and volatility.
| Identifer | oai:union.ndltd.org:NSYSU/oai:NSYSU:etd-0706112-175421 |
| Date | 06 July 2012 |
| Creators | Yeh, Yun-Hsuan |
| Contributors | Jen-Chih Yao, Hong-Kun Xu, Lai-Jiu Lin, Ngai-Ching Wong |
| Publisher | NSYSU |
| Source Sets | NSYSU Electronic Thesis and Dissertation Archive |
| Language | English |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | http://etd.lib.nsysu.edu.tw/ETD-db/ETD-search/view_etd?URN=etd-0706112-175421 |
| Rights | unrestricted, Copyright information available at source archive |
Page generated in 0.0021 seconds