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Quantitative Finance · Begrippenlijst

Wat is Bermudan exercise?

Definition 6.8 Derivatives and Volatility · Hoofdstuk 6 — American Options and Early Exercise

An option with Bermudan exercise can be exercised only on a finite set of dates before expiry. Its value lies between the European and the American values and increases with the set of exercise dates.

A one-year at-the-money put (r=5\%, =20\%) exercisable on 1 to 200 equally spaced dates, the last at expiry. One date is the European option; monthly exercise captures 90% of the early-exercise premium. Data: the tutorial.
Figure 6.4. A one-year at-the-money put (r=5%r=5\%, σ=20%\sigma=20\%) exercisable on 1 to 200 equally spaced dates, the last at expiry. One date is the European option; monthly exercise captures 90% of the early-exercise premium. Data: the tutorial.
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