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The Early Exercise Premium for American Options. Empirical Study on Sibex Market

Author

Listed:
  • Maria-Miruna POCHEA
  • Angela-Maria FILIP

    (“Babes-Bolyai University”, Cluj-Napoca)

Abstract

Within this paper, we proposed ourselves to test whether the early exercise premium for American put options is related to the moneyness, the time to maturity, the risk free rate and the volatility. Consequently, we used American put options on DESIF5 futures, the period analized being January 2009 – June 2010. The early exercise premium for American put options has been obtained using the put-call parity relationship and this is relevant for identifying arbitrage opportunities. The empirical results of this study are in line with those of Zivney and Sung and emphasize the relevance of the early exercise premium for developing American put options valuation models.

Suggested Citation

  • Maria-Miruna POCHEA & Angela-Maria FILIP, 2011. "The Early Exercise Premium for American Options. Empirical Study on Sibex Market," Finante - provocarile viitorului (Finance - Challenges of the Future), University of Craiova, Faculty of Economics and Business Administration, vol. 1(13), pages 188-197, December.
    • Handle: RePEc:aio:fpvfcf:v:1:y:2011:i:13:p:188-197
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    More about this item

    Keywords

    american options; put-call parity relationship; valuation model;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G19 - Financial Economics - - General Financial Markets - - - Other

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