ALTERNATIVE CHARACTERIZATIONS OF AMERICAN PUT OPTIONS

Peter Carr, Robert Jarrow () and Ravi Myneni
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Ravi Myneni: Graduate School of Business, Stanford University, Stanford, CA, USA

Chapter 5 in Financial Derivatives Pricing:Selected Works of Robert Jarrow, 2008, pp 85-103 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractWe derive alternative representations of the McKean equation for the value of the American put option. Our main result decomposes the value of an American put option into the corresponding European put price and the early exercise premium. We then represent the European put price in a new manner. This representation allows us to alternatively decompose the price of an American put option into its intrinsic value and time value, and to demonstrate the equivalence of our results to the McKean equation.

Keywords: Derivatives; Options; Hedging; HJM; Black–Scholes; Forwards; Futures; Martingale Measure; Calls; Puts; Market Manipulation; Margin Requirements (search for similar items in EconPapers)
Date: 2008
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Related works:
Journal Article: ALTERNATIVE CHARACTERIZATIONS OF AMERICAN PUT OPTIONS (1992)
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