Integral representation of vega for American put options

Yanchu Liu, Zhenyu Cui, Ning Zhang

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

Abstract

There is an inaccurate formula in Huang et al. (1996). In fact, a substantial term is missing in their equation (14) for computing the value of an important option hedging parameter, i.e., the vega. We fix it in this note by providing its correct form and characterizing an associated (new) integral equation. Some related explanations and arguments are also corrected.

Original languageEnglish
Pages (from-to)204-208
Number of pages5
JournalFinance Research Letters
Volume19
DOIs
StatePublished - 1 Nov 2016

Keywords

  • American put options
  • Exercise boundary
  • Integral equation
  • Vega

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