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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*
Affiliation:
The Robert H. Smith School of Business and Institute for Systems Research, University of Maryland, College Park, Maryland 20742-1815, E-mail: mfu@umd5.umd.edu
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: mfu@umd5.umd.edu
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: mfu@umd5.umd.edu
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: mfu@umd5.umd.edu
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Abstract

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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.

Information

Type
Research Article
Copyright
© 2000 Cambridge University Press