European Put-Call Parity and the Early Exercise Premium for American Currency Options

European Put-Call Parity and the Early Exercise Premium for American Currency Options

The European put-call parity condition is used to estimate the early exercise premium for American currency options traded on the Philadelphia Stock Exchange. Using a sample of 331 pairs of call and put options with the same exercise price and time to expiration, evidence is provided for early exerc...

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Veröffentlicht in:Multinational finance journal 2009-03, Vol.13 (1/2), p.39-54
Hauptverfasser: Poitras, Geoffrey, Veld, Chris, Zabolotnyuk, Yuriy
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Sprache:eng
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Interest rates
Put & call options
Securities prices
Studies
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container_title Multinational finance journal
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creator Poitras, Geoffrey
Veld, Chris
Zabolotnyuk, Yuriy
description The European put-call parity condition is used to estimate the early exercise premium for American currency options traded on the Philadelphia Stock Exchange. Using a sample of 331 pairs of call and put options with the same exercise price and time to expiration, evidence is provided for early exercise premiums that average 5.03% for put options and 4.60% for call options. The premiums for both call and put options are strongly related to the interest rate differential and time to expiration. These results have implications for the use of European option pricing models in the valuation of American options. [PUBLICATION ABSTRACT]
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source Elektronische Zeitschriftenbibliothek - Frei zugängliche E-Journals
subjects Interest rates
Put & call options
Securities prices
Studies
title European Put-Call Parity and the Early Exercise Premium for American Currency Options
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