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An Empirical Examination of the Pricing of American Put Options

Published online by Cambridge University Press:  06 April 2009

Edward C. Blomeyer  and
Herb Johnson
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Abstract

This study is an ex post performance test comparing the accuracy of an American model to a European model for valuing listed options. Specifically, the Geske and Johnson American put valuation model is compared with the Black and Scholes European put model. On average, both models undervalue, relative to market prices, put options. However, the Geske and Johnson model values are significantly closer to market prices than are the Black and Scholes values.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 23 , Issue 1 , March 1988 , pp. 13 - 22
Copyright
Copyright © School of Business Administration, University of Washington 1988

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