American Option Valuation Code

Posted: March 20th, 2011 | Author: | Filed under: Uncategorized | No Comments »

I finally added the American option valuation code from my Master’s Thesis. The python library provides call and put valuations as well as most greeks from the following papers/authors:

  1. An Approximate Formula For Pricing American Options. N. Ju and R. Zhong, Journal of Derivatives, 7, 2, 1999, p 31-40.
  2. The American Put Option and Its Critical Stock Price. David S. Bunch and Herb Johnson, Journal of Finance, Oct 2000, p 2333-2356.
  3. A New Analytical-Approximation Formula for the Optimal Exercise Boundary of American Put Options, S. P. Zhu, International Journal of Theoretical and Applied Finance, 9(7) 2006, p 1141-1177.

I wrote this code just after learning python so its readability is very poor and it is not object oriented. Not a high priority for me to go back and clean it up right now, but I had received a few random emails requesting the code, so I wanted to put it up. This code requires my Black-Scholes python library, which has Standard Black-Scholes Greeks. It also requires scipy for some numerical integration and optimization function calls. Hope you find it useful even with all these restrictions.

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