Strategic Timing in Financial Markets: Real Options Analysis of American Options
This paper delves into the nuanced realm of option pricing, focusing specifically on American call and put options within the framework of real options analysis. Traditional models often struggle to account for the complex decision-making process inherent in American options due to their early exerc...
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| Format: | Article |
| Language: | English |
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Accademia Piceno Aprutina dei Velati
2024-12-01
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| Series: | Ratio Mathematica |
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| Online Access: | http://eiris.it/ojs/index.php/ratiomathematica/article/view/1629 |
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| author | Gilles Tamba Bokolo Ngoyi Landu Tresor Mabela Rostin Rebecca Omana Walo |
| author_facet | Gilles Tamba Bokolo Ngoyi Landu Tresor Mabela Rostin Rebecca Omana Walo |
| author_sort | Gilles Tamba Bokolo |
| collection | DOAJ |
| description | This paper delves into the nuanced realm of option pricing, focusing specifically on American call and put options within the framework of real options analysis. Traditional models often struggle to account for the complex decision-making process inherent in American options due to their early exercise feature. Leveraging the flexibility offered by real options methodology, this paper explores the optimal stopping time, a critical determinant in option pricing. Through a rigorous analytical approach and Monte Carlo simulations, we unveil explicit expressions for the optimal stopping time and option values. By bridging theory with practical application, this research offers valuable insights into the dynamics of American options and their pricing in real-world financial markets. |
| format | Article |
| id | doaj-art-f208eef1a9c94ccca8a5dcab92a6b66f |
| institution | Kabale University |
| issn | 1592-7415 2282-8214 |
| language | English |
| publishDate | 2024-12-01 |
| publisher | Accademia Piceno Aprutina dei Velati |
| record_format | Article |
| series | Ratio Mathematica |
| spelling | doaj-art-f208eef1a9c94ccca8a5dcab92a6b66f2025-02-01T06:51:01ZengAccademia Piceno Aprutina dei VelatiRatio Mathematica1592-74152282-82142024-12-0153010.23755/rm.v53i0.1629952Strategic Timing in Financial Markets: Real Options Analysis of American OptionsGilles Tamba Bokolo0Ngoyi Landu Tresor1Mabela Rostin2Rebecca Omana Walo3University of KinshasaUniversity of KinshasaUniversity of KinshasaUniversity of KinshasaThis paper delves into the nuanced realm of option pricing, focusing specifically on American call and put options within the framework of real options analysis. Traditional models often struggle to account for the complex decision-making process inherent in American options due to their early exercise feature. Leveraging the flexibility offered by real options methodology, this paper explores the optimal stopping time, a critical determinant in option pricing. Through a rigorous analytical approach and Monte Carlo simulations, we unveil explicit expressions for the optimal stopping time and option values. By bridging theory with practical application, this research offers valuable insights into the dynamics of American options and their pricing in real-world financial markets.http://eiris.it/ojs/index.php/ratiomathematica/article/view/1629hamilton-jacobi-bellman (hjb) equationpayoff functionsoptimal stopping timeamerican call and put optionsreal optionsmonte carlo |
| spellingShingle | Gilles Tamba Bokolo Ngoyi Landu Tresor Mabela Rostin Rebecca Omana Walo Strategic Timing in Financial Markets: Real Options Analysis of American Options Ratio Mathematica hamilton-jacobi-bellman (hjb) equation payoff functions optimal stopping time american call and put options real options monte carlo |
| title | Strategic Timing in Financial Markets: Real Options Analysis of American Options |
| title_full | Strategic Timing in Financial Markets: Real Options Analysis of American Options |
| title_fullStr | Strategic Timing in Financial Markets: Real Options Analysis of American Options |
| title_full_unstemmed | Strategic Timing in Financial Markets: Real Options Analysis of American Options |
| title_short | Strategic Timing in Financial Markets: Real Options Analysis of American Options |
| title_sort | strategic timing in financial markets real options analysis of american options |
| topic | hamilton-jacobi-bellman (hjb) equation payoff functions optimal stopping time american call and put options real options monte carlo |
| url | http://eiris.it/ojs/index.php/ratiomathematica/article/view/1629 |
| work_keys_str_mv | AT gillestambabokolo strategictiminginfinancialmarketsrealoptionsanalysisofamericanoptions AT ngoyilandutresor strategictiminginfinancialmarketsrealoptionsanalysisofamericanoptions AT mabelarostin strategictiminginfinancialmarketsrealoptionsanalysisofamericanoptions AT rebeccaomanawalo strategictiminginfinancialmarketsrealoptionsanalysisofamericanoptions |