Integral representation of vega for American put options

Yanchu Liu; Zhenyu Cui; Ning Zhang

doi:10.1016/j.frl.2016.07.013

Integral representation of vega for American put options

Yanchu Liu
, Zhenyu Cui
, Ning Zhang

School of Business

Lingnan University
Jinan University
Qilu University of Technology

Research output: Contribution to journal › Article › peer-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 language	English
Pages (from-to)	204-208
Number of pages	5
Journal	Finance Research Letters
Volume	19
DOIs	https://doi.org/10.1016/j.frl.2016.07.013
State	Published - 1 Nov 2016

Keywords

American put options
Exercise boundary
Integral equation
Vega

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10.1016/j.frl.2016.07.013

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title = "Integral representation of vega for American put options",

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.",

keywords = "American put options, Exercise boundary, Integral equation, Vega",

author = "Yanchu Liu and Zhenyu Cui and Ning Zhang",

note = "Publisher Copyright: {\textcopyright} 2016 Elsevier Inc.",

year = "2016",

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AU - Cui, Zhenyu

AU - Zhang, Ning

PY - 2016/11/1

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N2 - 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.

AB - 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.

KW - American put options

KW - Exercise boundary

KW - Integral equation

KW - Vega

UR - https://www.scopus.com/pages/publications/84994096927

UR - https://www.scopus.com/pages/publications/84994096927#tab=citedBy

U2 - 10.1016/j.frl.2016.07.013

DO - 10.1016/j.frl.2016.07.013

M3 - Article

AN - SCOPUS:84994096927

SN - 1544-6123

VL - 19

SP - 204

EP - 208

JO - Finance Research Letters

JF - Finance Research Letters

ER -

Integral representation of vega for American put options

Abstract

Keywords

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