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Efficient Analytic Approximation of American Option Values

1987; Wiley; Volume: 42; Issue: 2 Linguagem: Inglês

10.1111/j.1540-6261.1987.tb02569.x

1540-6261

Giovanni Barone‐Adesi, Robert E. Whaley,

Economic theories and models

ABSTRACT This paper provides simple, analytic approximations for pricing exchange‐traded American call and put options written on commodities and commodity futures contracts. These approximations are accurate and considerably more computationally efficient than finite‐difference, binomial, or compound‐option pricing methods.