J Austral Math Soc Ser B 37 pp45--57, 1995.

A note on American options with varying exercise price

J. N. Dewynne and P. Wilmott

Abstract

We examine the valuation of American options in a discrete time setting where the exercise price is known a priori but varies with time. (This is in contrast with the classical Black-Scholes [2] analysis, which lies in a continuous time framework and with constant exercise price). In particular we consider a time series of exercise prices which are themselves a realisation of the share price random walk -— that of the previous year, say.

Browse the article

Authors

J. N. Dewynne

Department of Mathematics, University of Southampton, Southampton, SO17 1BJ, England.

P. Wilmott

Mathematical Inst., Oxford University, Oxford, England, and Dept. of Math., Imperial College, London, England.