The early exercise premium for the American put under discrete dividends

O.E. Göttsche, M.H. Vellekoop

    Research output: Contribution to journalArticleAcademicpeer-review

    6 Citations (Scopus)

    Abstract

    We derive an integral equation for the early exercise boundary of an American put option under Black–Scholes dynamics with discrete dividends at fixed times during the lifetime of the option. Our result is a generalization of the results obtained by Carr, Jarrow, and Myneni; Jacka; and Kim for the case without discrete dividends, and it requires a careful study of Snell envelopes for semimartingales with discontinuities.
    Original languageUndefined
    Pages (from-to)335-354
    Number of pages20
    JournalMathematical finance
    Volume21
    Issue number2
    DOIs
    Publication statusPublished - 2011

    Keywords

    • EWI-22259
    • MSC-91G20
    • Discrete dividends
    • Free boundary problems
    • METIS-289695
    • IR-81505
    • American options
    • Optimal stopping

    Cite this