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Book synopsis

This book proposes a closed-form solution for pricing an American put option on a non-dividend paying stock based on an optimally early-exercise strategy. An American put option should be early exercised when the maximum option premium of early exercise is not less than the value of its European counterpart; otherwise, it should not be early exercised. This paper also shows that Merton (1973)'s formula for pricing a perpetual American put option on a non-dividend paying stock is not perfect and shows such an option's value is equal to its strike price.

Book details

• Full title: The Closed-Form Solution for Pricing American Put Options
• Author: Xiaodong Wang
• Language: English
• Binding: Paperback
• Number of pages: 52
• EAN: 9783330013261
• ID: 15720506
• Publisher: LAP Lambert Academic Publishing
• Weight: 96 g
• Dimensions: 220 × 150 × 3 mm
• Published: 2016

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