The pricing formula for cancellable European options

Hsuan-Ku Liu

Papers from arXiv.org

Abstract: This paper examines the value of a cancellable European option in a finite time horizon setting. The specifications of this generalized European option allow the seller to cancel the option at any point in time for a fixed penalty paid directly to the holder. Here, we provide an explicit valuation formula for the European game call where the early cancellation time is obtained iteratively.

Date: 2013-04, Revised 2014-09
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