CONVEXITY OF THE EXERCISE BOUNDARY OF THE AMERICAN PUT OPTION ON A ZERO DIVIDEND ASSET

CONVEXITY OF THE EXERCISE BOUNDARY OF THE AMERICAN PUT OPTION ON A ZERO DIVIDEND ASSET

We show that the optimal exercise boundary for the American put option with non‐dividend‐paying asset is convex. With this convexity result, we then give a simple rigorous argument providing an accurate asymptotic behavior for the exercise boundary near expiry.

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Veröffentlicht in:Mathematical finance 2008-01, Vol.18 (1), p.185-197
Hauptverfasser: Chen, Xinfu, Chadam, John, Jiang, Lishang, Zheng, Weian
Format: Artikel
Sprache:eng
Schlagworte:
American put option on a zero dividend asset
Asset pricing
convexity of the early exercise boundary
free boundary problem
Mathematical finance
Mathematical models
near-expiry estimates
obstacle problem
Option pricing
Put & call options
Stock returns
Studies
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Beschreibung
Zusammenfassung:We show that the optimal exercise boundary for the American put option with non‐dividend‐paying asset is convex. With this convexity result, we then give a simple rigorous argument providing an accurate asymptotic behavior for the exercise boundary near expiry.
ISSN:0960-1627
1467-9965
DOI:10.1111/j.1467-9965.2007.00328.x