Explain Why It Is Impossible To Derive An Analytical Formula For Valu

Essay specific features

 

Issue:

Business

 

Written by:

Terry G

 

Date added:

March 4, 2015

 

Level:

University

 

Grade:

A

 

No of pages / words:

7 / 1770

 

Was viewed:

461 times

 

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Essay content:

Call options give the investor the right to buy the underlying stock at the exercise price, X; while the put options give the investor the right to sell the underlying security at X. However only America options can be exercised at any time during the life of the option if the holder sees fit while European options can only be exercised at the expiration rate, and this is the reason why American put options are normally valued higher than European options...
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However only America options can be exercised at any time during the life of the option if the holder sees fit while European options can only be exercised at the expiration rate, and this is the reason why American put options are normally valued higher than European options. Nonetheless it has been proved by academics that it is impossible to derive an analytical formula for valuing American put options and the reason why will be discussed in this paper as well as some main suggested techniques that are used to value them...
displayed 300 characters

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