Early exercise premium method for pricing American options under the J-model

Background:This study develops a new model called J-am for pricing American options and for determining the related early exercise boundary(EEB).This model is based on a closed-form solution J-formula for pricing European options,defined in the study by Jerbi(Quantitative Finance,15:2041-2052,2015).The J-am pricing formula is a solution of the Black&Scholes(BS)PDE with an additional function called f as a second member and with limit conditions adapted to the American option context.The aforesaid function f represents the cash flows resulting from an early exercise of the option.Methods:This study develops the theoretical formulas of the early exercise premium value related to three American option pricing models called J-am,BS-am,and Heston-am models.These three models are based on the J-formula by Jerbi(Quantitative Finance,15:2041-2052,2015),BS model,and Heston(Rev Financ Stud,6:327-343,1993)model,respectively.This study performs a general algorithm leading to the EEB and to the American option price for the three models.Results:After implementing the algorithms,we compare the three aforesaid models in terms of pricing and the EEB curve.In particular,we examine the equivalence between J-am and Heston-am as an extension of the equivalence studied by Jerbi(Quantitative Finance,15:2041-2052,2015).This equivalence is interesting since it can reduce a bi-dimensional model to an equivalent uni-dimensional model.Conclusions:We deduce that our model J-am exactly fits the Heston-am one for certain parameters values to be optimized and that all the theoretical results conform with the empirical studies.The required CPU time to compute the solution is significantly less in the case of the J-am model compared with to the Heston-am model.

Early Aerobic Exercise Promotes Neurological Function Recovery of Rats after Cerebral Ischemia/Reperfusion by Upregulating the Expression of Heat Shock Protein A5

Objective The neuroprotective function of heat shock protein A5(HSPA5)in ischemic stroke has been confirmed.This study aimed to investigate the effects of early aerobic exercise on neurological function recovery from cerebral ischemia/reperfusion and to determine whether these effects are associated with the expression level of HSPA5 in the ischemic penumbra.Methods A total of 72 male Sprague-Dawley rats were randomly assigned to the ischemia and exercise group[middle cerebral artery occlusion(MCAO)-Ex,n=18],ischemia and sedentary group(MCAO-St,n=18),sham-surgery and exercise group(Sham-Ex,n=18),or sham-surgery and sedentary group(Sham-St,n=18).The MCAO-Ex and MCAO-St groups were subjected to MCAO for 60 min,whereas the Sham-Ex and Sham-St groups were subjected to an identical operation without MCAO.Rats in the MCAO-Ex and Sham-Ex groups then ran on a treadmill for 30 min once a day for 5 consecutive days.After reperfusion,the motor function of the rats was scored by the Bederson neurological function test,balance beam test,and screen test.Nissl staining was conducted to assess morphological and structural change of nerve cells in the ischemic penumbra.The reverse transcription-quantitative polymerase chain reaction was applied to detect the mRNA expression of HSPA5.Western blot analysis was conducted to determine the protein expression of HSPA5.Terminal deoxynucleotidyl transferase-mediated dUTP nick-end labeling(TUNEL)staining was carried out in the ischemic penumbra after MCAO.Results Rats receiving early treadmill exercise had lower Bederson neurological function,balance beam,and screen test scores on the 3rd,7th,and 14th days after MCAO;in addition,more neurons survived in the ischemic penumbra after MCAO,and higher mRNA and protein expression of HSPA5 and fewer TUNEL-positive stained cells were observed.Conclusion Our study demonstrated that early aerobic exercise can improve neurological function recovery after ischemia/reperfusion.Furthermore,the increased level of HSPA5 in the ischemic penumbra might be one of the mechanisms of enhanced neurological function recovery.

Valuation of American Strangles Through an Optimized Lower–Upper Bound Approach

In this paper,we construct tight lower and upper bounds for the price of an American strangle,which is a special type of strangle consisting of long positions in an American put and an American call,where the early exercise of one side of the position will knock out the remaining side.This contract was studied in Chiarella and Ziogas(J Econ Dyn Control 29:31–62,2005)with the corresponding nonlinear integral equations derived,which are hard to be solved efficiently through numerical methods.We extend the approach in the paper of Broadie and Detemple(Rev Finance Stud 9:1211–1250,1996)from the case of American call options to the case of American strangles.We establish theoretical properties of the lower and upper bounds,and propose a sequential optimization algorithm in approximating the early exercise boundary of the American strangle. The theoretical bounds obtained can beeasily evaluated, and numerical examples confirm the accuracy of the approximationscompared to the literature.