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Explain Why It Is Impossible To Derive An Analytical Formula For Valuing American Puts.
Beginning of essay
Explain Why It Is Impossible to Derive An Analytical Formula For Valuing American
Explain why it has proved impossible to derive an analytical formula for valuing
American Puts, and outline the main techniques that are used to produce
approximate valuations for such securities
Investing in stock op ....
Middle of essay
....s $20 gain since negative stock prices are
impossible. Therefore it implies that if the share price was zero, the put
would have reached its highest possible value so the investor should exercise
the option early at this point of time.
Additionally, in general, the early exerices of a put option becomes more
attractive as S, the stock price, decreases; as r, the risk-free interest rate,
increases; and as , the volatility, decreases. Since the value of a put is
always positive as the worst can.... |
| Number of words: 1728 |
Approximate pages: 7 |
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