By considering the corresponding integral representation of the early exercise premium of an American commodity option with
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By considering the corresponding integral representation of the early exercise premium of an American commodity option with cost of carry b, show that
(a) When b ≥ r, r is the riskless interest rate, there is no advantage of early exercise for the American commodity call option;
(b) Advantage of early exercise always exists for the American commodity put option for all values of b.
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To consider the integral representation of the early exercise premium of an American commodity option we first define the early exercise premium as th...View the full answer
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