- Valuing stock options when prices are subject to a lower boundary: a correction
- The Journal of Futures Markets
- Number of pages
- Document type
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
- This note discusses and corrects an inaccurate statement in Veestraeten (2008) concerning the valuation of European stock
options in the presence of a lower reflecting boundary.
The claim that the put price can be obtained via the risk-neutral call price and the put call parity is not correct. In fact, this note shows that the put call parity cannot be applied when reflection is possible.
- October 3, 2012
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