NONCONVEXITY OF THE OPTIMAL EXERCISE BOUNDARY FOR AN AMERICAN PUT OPTION ON A DIVIDEND‐PAYING ASSET

Fri, 17 Feb 2012 01:04:12 GMT

We prove that when the dividend rate of the underlying asset following a geometric Brownian motion is slightly larger than the risk‐free interest rate, the optimal exercise boundary of the American put option is not convex.

finance, options, derivatives, investment, mathematical finance, stochastic processes, exercise, put option, futures contract, dividend, brownian motion, social issues

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Mathematical Finance

NONCONVEXITY OF THE OPTIMAL EXERCISE BOUNDARY FOR AN AMERICAN PUT OPTION ON A DIVIDEND‐PAYING ASSET

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