Date of Submission

Spring 2019

Academic Programs and Concentrations


Project Advisor 1

Stefan Méndez-Diez

Abstract/Artist's Statement

The mathematical model for computing the value of European options has been discovered and known as the Black-Scholes model. Later on, the model has been modified by other people in order to value American options. In this project, we introduce the Black-Scholes model and another three analytical methods for American options on stocks paying a single dividend, which are the Black's approximation, the Roll-Geske-Whaley approximation, and the Barone-Adesi Whaley approximation. We compare the results of option prices computed by the three American option pricing methods to the actual prices in the financial market to examine their accuracy. We also compare the values obtained by our code to the MATLAB built-in functions. The result shows that in general, our code has better performances than the MATLAB code.

Open Access Agreement

On-Campus only

Creative Commons License

Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

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