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- Title
ALTERNATIVE CHARACTERIZATIONS OF AMERICAN PUT OPTIONS.
- Authors
Carr, Peter; Jarrow, Robert; Myneni, Ravi
- Abstract
We 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.
- Subjects
OPTIONS (Finance); PRICES; MATHEMATICAL economics; INVESTMENTS; DERIVATIVE securities
- Publication
Mathematical Finance, 1992, Vol 2, Issue 2, p87
- ISSN
0960-1627
- Publication type
Article
- DOI
10.1111/j.1467-9965.1992.tb00040.x