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RESEARCH PRODUCT

Valuing American Options with Implementation

Kathrine Salamonsen

subject

VDP::Samfunnsvitenskap: 200::Økonomi: 210Binomial MethodAmerican OptionsVDP::Matematikk og Naturvitenskap: 400::Informasjons- og kommunikasjonsvitenskap: 420::Algoritmer og beregnbarhetsteori: 422BE501Implicit Finite Dfference MethodLeast Square Monte Carlo

description

Master's thesis Business Administration BE501 - University of Agder 2017 This master thesis aims to value American put options by using di erent numerical methods. Three valuation methods for valuing an American put option will be pre- sented and analyzed; the binomial method, the implicit nite di erence method and the least squares Monte Carlo approach (LSM). Due to the opportunity of early exercise of American option contracts, our goal is to nd the optimal exercise strategy which maximizes the payo by using numerical methods. We provide examples of how to implement each algorithm in di erent types of software. A comparison of the methods are given at the end.

yearjournalcountryeditionlanguage
2017-01-01
http://hdl.handle.net/11250/2453783