The Early Exercise Premium for American Options. Empirical Study on Sibex Market

Maria-Miruna Pochea and Angela-Maria Filip
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Angela-Maria Filip: “Babes-Bolyai University”, Cluj-Napoca

Finante - provocarile viitorului (Finance - Challenges of the Future), 2011, vol. 1, issue 13, 188-197

Abstract: Within this paper, we proposed ourselves to test whether the early exercise premium for American put options is related to the moneyness, the time to maturity, the risk free rate and the volatility. Consequently, we used American put options on DESIF5 futures, the period analized being January 2009 – June 2010. The early exercise premium for American put options has been obtained using the put-call parity relationship and this is relevant for identifying arbitrage opportunities. The empirical results of this study are in line with those of Zivney and Sung and emphasize the relevance of the early exercise premium for developing American put options valuation models.

Keywords: american options; put-call parity relationship; valuation model (search for similar items in EconPapers)
JEL-codes: G12 G14 G19 (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:aio:fpvfcf:v:1:y:2011:i:13:p:188-197

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