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The American straddle close to expiry

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Abstract

We address the pricing of American straddle options. We use a technique due to Kim (1990) to derive an expression involving integrals for the price of such an option close to expiry. We then evaluate this expression on the dual optimal exercise boundaries to obtain a set of integral equations for the location of these exercise boundaries, and solve these equations close to expiry.

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Correspondence to Ghada Alobaidi.

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Keywords

  • Differential Equation
  • Integral Equation
  • Partial Differential Equation
  • Ordinary Differential Equation
  • Functional Equation