Let P(St, t; K,T) be the price of an American put option where St is the...

 

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Let P(St, t; K,T) be the price of an American put option where St is the asset price at time t max Ke {. -r(Tt) Ste D(T-t) 9,0}. Hint: Use (i) the put-call parity for the European options for the underlying which pays a con- tinuous dividend yield, and (ii) a inequality relation between American and European put option prices. Let P(St, t; K,T) be the price of an American put option where St is the asset price at time t max Ke {. -r(Tt) Ste D(T-t) 9,0}. Hint: Use (i) the put-call parity for the European options for the underlying which pays a con- tinuous dividend yield, and (ii) a inequality relation between American and European put option prices.

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