Pricing jump diffusion American call option with dividends

Empirical evidence shows the presence of a jump component in addition to the diffusion component in the evolution of asset prices. In this article, jump-diffusion model described the underlying stock price dynamics. An approach of extrapolation acceleration was developed to yield a simple and efficient computation procedure for practical pricing of American call option on a stock with continuous dividends Numerical results were presented to demonstrate the validity and accuracy of the pricing approach compared with the quadratic approximation method, binomial method and compound option method. This study will be used to simplify the valuation of other complex contracts such as American currency options, options on futures, coupon bonds, or warrants on dividend paying stocks.