The Closed-Form Solution for Pricing American Put Options
- Editore:
LAP Lambert Academic Publishing
- EAN:
9783330013261
- ISBN:
3330013265
- Pagine:
- 52
- Formato:
- Paperback
- Lingua:
- Tedesco
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Descrizione The Closed-Form Solution for Pricing American Put Options
This book proposes a closed-form solution for pricing an American put option on a non-dividend paying stock based on an optimally early-exercise strategy. An American put option should be early exercised when the maximum option premium of early exercise is not less than the value of its European counterpart; otherwise, it should not be early exercised. This paper also shows that Merton (1973)¿s formula for pricing a perpetual American put option on a non-dividend paying stock is not perfect and shows such an option¿s value is equal to its strike price.
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€ 30.87
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