1. A new form of the early exercise premium for American type derivatives
- Author
-
Tsvetelin S. Zaevski
- Subjects
General Mathematics ,Applied Mathematics ,Short paper ,General Physics and Astronomy ,Statistical and Nonlinear Physics ,Type (model theory) ,01 natural sciences ,Maturity (finance) ,Lévy process ,010305 fluids & plasmas ,Derivative (finance) ,0103 physical sciences ,Asset (economics) ,Put option ,010301 acoustics ,Mathematical economics ,Brownian motion ,Mathematics - Abstract
The purpose of this short paper is to present a new form of the so called early exercise premium for the American type derivatives. The decomposition we derived consists of the corresponding European derivative and a derivative with a stochastic maturity. In different particular cases we reach to the well known form for the American put option where the underlying asset is driven by a Brownian motion or a Levy process.
- Published
- 2019