THE INTERSECTION BETWEEN EUROPEAN PUT PRICE AND ITS PAYOFF FUNCTION

In this paper, we study the intersection between the price of a European put and its payoff function. We derive asymptotic expansion formulas for the intersection near expiration date for three different cases of risk-free rate r and dividend yield q, i.e. r > q, r = q, and r < q. The comparison with those of the critical stock price of an American option enhances our understanding on the convergence of the asymptotic expansion near a singular point.

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Year of publication:	2013
Authors:	ZHANG, JIN E. ; HUANG, SHOUJUN ; LI, TIECHENG
Published in:	International Journal of Theoretical and Applied Finance (IJTAF). - World Scientific Publishing Co. Pte. Ltd., ISSN 1793-6322. - Vol. 16.2013, 04, p. 1350022-1
Publisher:	World Scientific Publishing Co. Pte. Ltd.
Subject:	European put \| payoff function \| Black–Scholes formula \| asymptotic expansion

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Extent:	application/pdf text/html
Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011011298