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American Futures Options
Hi there,I want to price american futures options in the commodity market. Now I ask myself:- How good does the Black model for european futures options serve as a proxy?- Assuming deterministic interest rates, is there any price difference at all between european and american calls on a future underlying?- If so, under which circumstances will an early exercise be beneficial?Thanks for your answers!
American Futures Options
i dont think there is an early exercise premium if the cost of carry is zero.
knowledge comes, wisdom lingers
American Futures Options
Options, Futures, and Other Derivatives, 7th Edition J.C Hullplease have a look at echapter 16more specifically, 16.9 American Futures Options vs. American Spot Options
Last edited by tags on December 15th, 2010, 11:00 pm, edited 1 time in total.