Exchange options for catastrophe risk management

On the exercise of American quanto options

“…As options markets o¤er vital services and signals to hedgers, investors, and …nancial decision makers, American/European-type option pricing remains an extremely active research area in the …nancial economics literature (e.g. Almeida and Freire (2021), Amaya, Bégin, and Gauthier (2021), Aramonte, Jahan-Parvar, Rosen, and Schindler (2021), Bakshi, Cao, and Zhong (2021), Barro and Liao (2021), Battauz and Rotondi (2022), De Donno, Palmowski and Tumilewicz (2020), Figlewski (2021), Golez and Goyenko (2021), Jeon and Kim (2021), Jing, Li, and Ma (2021), Lee, Han and Lee (2021), Yu (2021), Wang (2021a), Wang (2021b), Wang, Wang and Shao (2022), and Wang and Zhang (2022)). Amid the impressive growth of the FX options markets (see for example James, Fullwood, and Billington (2015)), the appeal of quanto options comes from their ability of opening up hedging/investment opportunities in international markets as they are derivative contracts written on an underlying foreign security.…”