case09 - Introduction to derivatives, Fall 2011 BUSI 588,...

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Introduction to derivatives, Fall 2011 BUSI 588, Case 9 Galitzin - pricing American options Please prepare for class discussion on Monday, 9/26. You were having a great summer intershipt at Golden Sacks until you received the call from Galitzin. Prince Galitzin, one of the best clients at Golden Sacks, had a rather unusual request: he would four year maturity! Moreover, he was asking for the option to be American - just so one could not even use the Black- Scholes model to price it. Galitzin was talking about buying close to $5m worth of options, so one had to make sure the pricing was good - this deal should not go to the competition, neither should it be mispriced! 1
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