The Effect of Nonsmooth Payoffs on the Penalty Approximation of American Options
This article combines various methods of analysis to draw a comprehensive picture of penalty approximations to the value, hedge ratio, and optimal exercise strategy of American options. We use matched asymptotic expansions to characterize the boundary layers between exercise and hold regions, and to...
| Main Authors: | , , |
|---|---|
| Format: | Journal article |
| Published: |
2013
|