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Barone-Adesi And Whaley Model

What does Barone-Adesi And Whaley Model mean?

An American option pricing model. Barone-Adesi And Whaley Model is a method for pricing American call and put options on commodities and commodity futures. The computation is based on price of the underlying asset and carrying cost, besides other parameters. 

Futures Knowledge Explains Barone-Adesi And Whaley Model

Barone-Adesi And Whaley Model gives a simple formula for estimating the value of American options. As American options can be exercised at or before expiry, Barone-Adesi And Whaley Model’s estimate is based on two parts: pricing for a European option plus the value for early exercise. The computation is simple and is based on quadratic approximation.

It is also known as Quadratic Approximation pricing method.

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