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A NOTE ON PERTURBATION ANALYSIS ESTIMATORS FOR AMERICAN-STYLE OPTIONS

Published online by Cambridge University Press:  01 July 2000

Michael C. Fu* ,
Rongwen Wu ,
Gül Gürkan  and
A. Yonca Demir
Michael C. Fu*
Affiliation:
The Robert H. Smith School of Business and Institute for Systems Research, University of Maryland, College Park, Maryland 20742-1815, E-mail: [email protected]
Rongwen Wu
Affiliation:
The Robert H. Smith School of Business and Institute for Systems Research, University of Maryland, College Park, Maryland 20742-1815, E-mail: [email protected]
Gül Gürkan
Affiliation:
The Robert H. Smith School of Business and Institute for Systems Research, University of Maryland, College Park, Maryland 20742-1815, E-mail: [email protected]
A. Yonca Demir
Affiliation:
The Robert H. Smith School of Business and Institute for Systems Research, University of Maryland, College Park, Maryland 20742-1815, E-mail: [email protected]
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Abstract

In this note, we correct an error in the paper by Fu and Hu [1] for the perturbation analysis estimator given for the gradient of an American call option payoff on an underlying asset paying multiple dividends. We then introduce a different asset price model that is more straightforward than the previous model, and derive the corresponding gradient estimators. We conclude with a brief discussion of extensions of the estimator to other American-style options.

Type
Research Article
Information
Probability in the Engineering and Informational Sciences , Volume 14 , Issue 3 , July 2000 , pp. 385 - 392
Copyright
© 2000 Cambridge University Press

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