Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
1142069 | Operations Research Letters | 2016 | 7 Pages |
Abstract
This note discusses how the never-early-exercise region of American power exchange options is influenced by the nonlinearity from its power coefficients. We consider a class of models which satisfy the power invariant property and show that early exercise depends crucially on the quantities termed effective dividend yields. Our mathematical analysis extends an existing model-free result and indicates how early exercise should depend on parameters. A numerical analysis is conducted to complement the analytical results and provide further observations.
Keywords
Related Topics
Physical Sciences and Engineering
Mathematics
Discrete Mathematics and Combinatorics
Authors
Daniel Wei-Chung Miao, Xenos Chang-Shuo Lin, Steve Hsin-Ting Yu,