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A note on the pricing of the perpetual American capped power put option

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  • Sakagami, Yoshitaka
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    Abstract

    We give an explicit solution to the perpetual American capped power put option pricing problem in the Black-Scholes-Merton Model. The approach is mainly based on free-boundary formulation and verification. For completeness we also give an explicit solution to the perpetual American standard power (≥1) option pricing problem.

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    File URL: http://mpra.ub.uni-muenchen.de/37727/
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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 37727.

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    Date of creation: 29 Mar 2012
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    Handle: RePEc:pra:mprapa:37727

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    Keywords: The perpetual American capped power put option; geometric Brownian motion; free-boundary;

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