ACTA MATHEMATICA UNIVERSITATIS COMENIANAE

Vol. LXXIII, 2 (2004)
p. 161 174

The American Put Option Close to Expiry
R. Mallier and G. Alobaidi


Abstract.  We use an asymptotic expansion to study the behavior of the American put option close to expiry for the case where the dividend yield is less than or equal to the risk-free interest rate. Series solutions are obtained for the location of the free boundary and the price of the option in that limit.

AMS Subject classification:  91B28;  
Keywords:  American options, asymptotics, free boundary, equity securities.

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