Recchioni, M.C., Sun, Y. and Tedeschi, G. (2017) Can Negative Interest Rates Really Affect Option Pricing? Empirical Evidence from an Explicitly Solvable Stochastic Volatility Model. Quantitative Finance, 1-19.
https://doi.org/10.1080/14697688.2016.1272763

has been cited by the following article:

• TITLE: The Effects of Negative Nominal Rates on the Pricing of American Calls: Some Theoretical and Numerical Insights

  AUTHORS: Alessia Cafferata, Pier Giuseppe Giribone, Marina Resta

  KEYWORDS: American Options, Quasi-Closed Formulas, Negative Interest Rates, Stochastic Trinomial Trees

  JOURNAL NAME: Modern Economy, Vol.8 No.7, July 13, 2017

  ABSTRACT: The article investigates the effects played on options pricing by negative risk-free rates when the underlying is an equity with null dividends. In such anomalous conditions, in fact, the fair value at early exercise of the American Call would not match the value of the European Call with the same financial features. We originally motivate this assumption with theoretical arguments. We then move to an empirical investigation where we put at work some quasi-closed formulas for pricing an American option and the stochastic trinomial trees algorithm. We then draw the conclusion that from a numerical viewpoint, the bias between the fair value of the American Call and the value of the corresponding. European Call is mainly due to approximation errors, which can be mitigated when Trinomial Stochastic Trees are used.