PRICING AND HEDGING AMERICAN OPTIONS - A RECURSIVE INTEGRATION METHOD

In this article, we present a new method for pricing and hedging Ameri can options along with an efficient implementation procedure. The prop osed method is efficient and accurate in computing both option values and various option hedge parameters. We demonstrate the computational accuracy, and efficiency of this numerical procedure in relation to ot her competing approaches. We also suggest how the method can be applie d to the case of any American option for which a closed-form solution exists for the corresponding European option.