The early exercise premium for the American put under discrete dividends

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Göttsche, O.E. and Vellekoop, M.H. (2011) The early exercise premium for the American put under discrete dividends. Mathematical Finance, 21 (2). pp. 335-354. ISSN 0960-1627

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Abstract:We derive an integral equation for the early exercise boundary of an American put option under Black–Scholes dynamics with discrete dividends at fixed times during the lifetime of the option. Our result is a generalization of the results obtained by Carr, Jarrow, and Myneni; Jacka; and Kim for the case without discrete dividends, and it requires a careful study of Snell envelopes for semimartingales with discontinuities.
Item Type:Article
Copyright:© Wiley
Faculty:
Electrical Engineering, Mathematics and Computer Science (EEMCS)
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Link to this item:http://purl.utwente.nl/publications/81505
Official URL:http://dx.doi.org/10.1111/j.1467-9965.2010.00427.x
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