American option valuation: implied calibration of GARCH pricing modelsWeber, M. and Prokopczuk, M. (2011) American option valuation: implied calibration of GARCH pricing models. The Journal of Futures Markets, 31 (10). pp. 971-994. ISSN 1096-9934 Full text not archived in this repository. It is advisable to refer to the publisher's version if you intend to cite from this work. See Guidance on citing. To link to this item DOI: 10.1002/fut.20496 Abstract/SummaryThis study analyzes the issue of American option valuation when the underlying exhibits a GARCH-type volatility process. We propose the usage of Rubinstein's Edgeworth binomial tree (EBT) in contrast to simulation-based methods being considered in previous studies. The EBT-based valuation approach makes an implied calibration of the pricing model feasible. By empirically analyzing the pricing performance of American index and equity options, we illustrate the superiority of the proposed approach.
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