scholarly journals A simple method for extracting the probability of default from American put option prices

2020 ◽  
Vol 40 (10) ◽  
pp. 1535-1547
Author(s):  
Bo Young Chang ◽  
Greg Orosi
Keyword(s):  
Probability Of Default ◽  
Option Prices ◽  
Simple Method ◽  
American Put Option ◽  
Put Option ◽  
American Put

The American put option in a one-dimensional diffusion model with level-dependent volatility

Stochastics ◽  
2007 ◽  
Vol 79 (1-2) ◽  
pp. 5-25 ◽  
Author(s):  
P. Babilua ◽  
I. Bokuchava ◽  
B. Dochviri ◽  
M. Shashiashvili
Keyword(s):  
Diffusion Model ◽  
One Dimensional ◽  
American Put Option ◽  
Put Option ◽  
Dimensional Diffusion ◽  
American Put

On Pricing American Put Option on a Fixed Term: A Monte Carlo Approach

2021 ◽  
pp. 2050010
Author(s):  
Perpetual Andam Boiquaye
Keyword(s):  
Monte Carlo ◽  
Optimal Stopping ◽  
Geometric Mean ◽  
Option Price ◽  
Stopping Time ◽  
Optimal Stopping Time ◽  
American Put Option ◽  
Put Option ◽  
One Year ◽  
American Put

This paper focuses primarily on pricing an American put option with a fixed term where the price process is geometric mean-reverting. The change of measure is assumed to be incorporated. Monte Carlo simulation was used to calculate the price of the option and the results obtained were analyzed. The option price was found to be $94.42 and the optimal stopping time was approximately one year after the option was sold which means that exercising early is the best for an American put option on a fixed term. Also, the seller of the put option should have sold $0.01 assets and bought $ 95.51 bonds to get the same payoff as the buyer at the end of one year for it to be a zero-sum game. In the simulation study, the parameters were varied to see the influence it had on the option price and the stopping time and it showed that it either increases or decreases the value of the option price and the optimal stopping time or it remained unchanged.

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