- The early exercise premium for American put options on stocks with dividends
- Number of pages
- Amsterdam: Faculteit Economie en Bedrijfskunde
- Document type
- Working paper
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
The difference between an American put option and its European counterpart has been
characterized in terms of a simple integral expression which can be used to calculate the
optimal exercise boundary in a recursive manner, if Black-Scholes dynamics are assumed for the underlying asset. In this paper we extend this formula to the case where a more
general stock and cumulative dividend process are included, and show how this changes the properties of the optimal exercise boundary.
If you believe that digital publication of certain material infringes any of your rights or (privacy) interests, please let the Library know, stating your reasons. In case of a legitimate complaint, the Library will make the material inaccessible and/or remove it from the website. Please Ask the Library, or send a letter to: Library of the University of Amsterdam, Secretariat, Singel 425, 1012 WP Amsterdam, The Netherlands. You will be contacted as soon as possible.