Geodesic
American Bond Options Close to Expiry
Ghada Alobaidi1 ; Roland Mallier2 ; Ghada Alobaidi ; Roland Mallier
1Department of Mathematics and Statistics American University of Sharjah Sharjah, United Arab Emirates
2Department of Mathematics and Statistics, York University, Toronto ON M3J 1P3
Acta mathematica Universitatis Comenianae, Tome 86 (2017) no. 2, pp. 243-262 
Ghada Alobaidi; Roland Mallier; Ghada Alobaidi; Roland Mallier. American Bond Options Close to Expiry. Acta mathematica Universitatis Comenianae, Tome 86 (2017) no. 2, pp. 243-262. http://geodesic.mathdoc.fr/item/AMUC_2017_86_2_a4/
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     author = {Ghada Alobaidi and Roland Mallier and Ghada Alobaidi and Roland Mallier},
     title = { American {Bond} {Options} {Close} to {Expiry}},
     journal = {Acta mathematica Universitatis Comenianae},
     pages = {243--262},
     year = {2017},
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     number = {2},
     url = {http://geodesic.mathdoc.fr/item/AMUC_2017_86_2_a4/}
}
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Voir la notice de l'article provenant de la source Comenius University

We address the pricing of American-style options on zero coupon bondsunder the assumption that interest rates obey a mean-reverting random walkas given by the Vasicek model.We use a technique due to Kolodner (1956) and Kim (1990) to derive anexpression involving integrals for the price of such an option close toexpiry. We then evaluate this expression on the optimal exercise boundary to obtaina pair of integral equations for the location of this exercise boundary,and solve these equations close to expiry.As with American equity options, as we approach expiry, there are threepossible behaviors for the optimal exercise boundary.