Pricing of American Options

DIG3An option is the right (but not the obligation) to buy, at or before an agreed expiry date, a share at a ‘strike price’ (agreed now). An American option allows the option buyer to cash in the option at any time between now and expiry (for European options, the buyer must wait until expiry). Because of the flexibility, pricing such options is mathematically tricky. A project would investigate possible methods for pricing American options.

Supervisor: Dr David Graham