Laplace Transforms and the American Straddle

نویسندگان

  • G. ALOBAIDI
  • R. MALLIER
چکیده

together with appropriate boundary conditions, where S is the price of the underlying security and t < T is the time, with T being the expiry time. The parameters in the above equation are the risk-free rate, r, the dividend yield, D0, and the volatility, σ; all of them are assumed constant. In addition, we assume that r > D0 > 0. If an option is European, it can only be exercised at the expiration date. If an option is American, it can be exercised at or before expiry, and a rational investor will exercise the option early if it is to his advantage. There are therefore regions where it is optimal to hold the option

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تاریخ انتشار 2002