American Forward

[ChrisDerick]

Hi guys,

I've recently been working on american FX forward (a forward contract with early exercise option). An interesting (and obvious) result is that we should always price the forward at the start of the callable window, for a sell contract.

I've verified the result by simulation (binomial tree). I wonder if fellow forumers can point more reading materials for me? for example, it would be interesting if we can get the sensitivities and such. I've tried to dig around with no avail..

Thanks in advance!

 

[Daniel Duffy]

Seeing that no one has answered.

The PDE/finite difference approach is worth looking into.

 

[ChrisDerick]

Seeing that no one has answered.

The PDE/finite difference approach is worth looking into.

Thanks Daniel, yeah I would probably work on the PDE approach as well.