American stochastic volatility call option pricing: A lattice based approach
 Thomas J. Finucane,
 Michael J. Tomas
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This study presents a new method of pricing options on assets with stochastic volatility that is lattice based, and can easily accommodate early exercise for American options. Unlike traditional lattice methods, recombination is not a problem in the new model, and it is easily adapted to alternative volatility processes. Approximations are developed for European C.E.V. calls and American stochastic volatility calls. The application of the pricing model to exchange traded calls is also illustrated using a sample of market prices. Modifying the model to price American puts is straightforward, and the approach can easily be extended to other nonrecombining lattices.
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 Title
 American stochastic volatility call option pricing: A lattice based approach
 Journal

Review of Derivatives Research
Volume 1, Issue 2 , pp 183201
 Cover Date
 19960601
 DOI
 10.1007/BF01531598
 Print ISSN
 13806645
 Online ISSN
 15737144
 Publisher
 Kluwer Academic Publishers
 Additional Links
 Topics
 Keywords

 Options
 Numerical Pricing
 Industry Sectors
 Authors

 Thomas J. Finucane ^{(1)}
 Michael J. Tomas ^{(2)}
 Author Affiliations

 1. Syracuse University, USA
 2. Chicago Board of Trade, USA