Consider an American put option on an asset which pays no dividend Show that the early exercise premium e(S, X) is bounded by er rX rX e N() d e(S, t X) rx e N( ) d, fe where de In S (T) S (0) S (x) (r 02 ) X 1 97' 2r de S (0) X In S 5 (0) (r 2 2) O...

Consider an American put option on an asset which pays no dividend. Show that the early exercise

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Consider an American put option on an asset which pays no dividend. Show that the early exercise premium e(S, τ; X) is bounded by

er rX rX * e- N() d e(S, t; X) rx [*e- N(-) d, fe where de In S* (T) S* (0) S* (x) = + (r 02 ) X 1 +97' 2r

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Question Posted: Dec 05, 2023 01:13 AM

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Consider an American put option on an asset which pays no dividend. Show that the early exercise

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e¯r§ rX rX * e-¹² N(−ã£) d² ≤ e(S, t; X) ≤ rx [*e-¹² N(-đ³) dž, fe where de In S* (T) S* (0) S* (x) = + (r − 02² )§ X 1 +97²' 2r de S* (0) = X. In S* 5² (∞0) + (r = 2/2²) O √

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The expression youve provided seems to be related to the early exercise premium for an American put ...View the full answer

Mathematical Models Of Financial Derivative

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e¯r§ rX rX * e-¹² N(−ã£) d² ≤ e(S, t; X) ≤ rx [e-¹² N(-đ³) dž, fe where de In S (T) S* (0) S* (x) = + (r − 02² )§ X 1 +97²' 2r de S* (0) = X. In S* 5² (∞0) + (r = 2/2²) O √