most accurate analytic approximation for American options with cash dividends

External question — Quantitative Finance Stack Exchange Author: QuantCalc.net Original post: https://quant.stackexchange.com/questions/85306 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. I have a two-part question regarding American option pricing: Which analytic approximation is currently considered the most accurate for valuing American options with discrete cash dividends? In the absence of a dedicated discrete model, what are the primary pricing discrepancies and risks associated with substituting discrete dividends with a continuous dividend yield?

External answer — Quantitative Finance Stack Exchange Author: João Original post: https://quant.stackexchange.com/a/85307 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. Voladynamics base you'll miss the "break" of the GBM, misprice has there's no jump ex-date time just a smooth continuous yield, undervalue calls, mismatched greeks and depending on the dividends schedules e.g., FTSE, SPX, NIKKEI there will be wider gaps