Pricing the American Feature

Carl Chiarella*, Xue Zhong He, Christina Sklibosios Nikitopoulos

*Corresponding author for this work

Research output: Chapter in Book or Report/Conference proceedingChapterpeer-review


To understand the problems and techniques of pricing the American feature of an option, this chapter introduces the American option pricing problem from the conventional approach based on compound options and the free boundary value problem which can be solved by using either the Fourier transform technique or a simple approximation procedure. The framework developed is readily extended to other option pricing problems.

Original languageEnglish
Title of host publicationDynamic Modeling and Econometrics in Economics and Finance
PublisherSpringer Science and Business Media Deutschland GmbH
Number of pages21
Publication statusPublished - 2015
Externally publishedYes

Publication series

NameDynamic Modeling and Econometrics in Economics and Finance
ISSN (Print)1566-0419
ISSN (Electronic)2363-8370


  • American Options
  • Compound Option
  • Critical Stock Price
  • Free Boundary Value Problem
  • Simple Estimation Procedure


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