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What is Optimal Exercise Price for American Options about?
This paper analyzes the optimal exercise price of American put options near expiry, focusing on scenarios where the underlying asset pays dividends and its volatility varies with time and price. The authors derive the asymptotic behavior of the critical price using singular perturbation methods, revealing that if dividends exceed the risk-free interest rate, the critical price behaves parabolically; otherwise, a logarithmic factor is introduced. These findings enhance numerical methods for calculating optio
- Author
- Veeken Chaglassian
- Language
- EN