Article1988

An Empirical Examination of the Pricing of American Put Options

27 citations0/0 files storedJournal of Financial and Quantitative Analysis

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Stochastic processes and financial applications Financial Markets and Investment Strategies Capital Investment and Risk Analysis

Abstract

This study is an ex post performance test comparing the accuracy of an American model to a European model for valuing listed options. Specifically, the Geske and Johnson American put valuation model is compared with the Black and Scholes European put model. On average, both models undervalue, relative to market prices, put options. However, the Geske and Johnson model values are significantly closer to market prices than are the Black and Scholes values.

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1973The Pricing of Options and Corporate Liabilities 1979Option pricing: A simplified approach 1976Option pricing when underlying stock returns are discontinuous 1980The Extreme Value Method for Estimating the Variance of the Rate of Return 1975Fact and Fantasy in the Use of Options 1984The American Put Option Valued Analytically 1985Nonparametric Tests of Alternative Option Pricing Models Using All Reported Trades and Quotes on the 30 Most Active CBOE Option Classes from August 23, 1976 Through August 31, 1978 1977THE VALUATION OF AMERICAN PUT OPTIONS

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1987Valuation of American options on foreign currency

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