[Quantlib-users] Valuation of a derivative which starts off as a European Call Option and finishes as an American Call Option

[Ngonidzashe F. <ngo...@gm...>]

Dear QuantLib Users,

Can someone assist me on the valuation of a derivative which starts off as
a European Call Option for the first 2 years and finishes off as an
American Call Option for the last 2 years.

I understand that the best way to do this, is using a binomial tree. Since
you work backwards, you first treat the last 2 years as a standard American
option, working from the maturity date (4 years) to the 2 year date, and
checking in every step whether it is optimal to exercise early or not. From
then on you continue backwords to today but now you no longer take American
but European steps (i.e. you do not maximize with the early exercise payoff
anymore). This should give the correct value but I do not know how best to
model it in QuantLib-Python.

Kind regards,

Ngoni