The binomial algorithm (Cox and Rubinstein, 1985) is an accepted theoretically justifiable standard for measuring the accuracy of American put option pricing algorithms. An important question is whether it also generates accurate estimates of the early exercise boundary (Lamberton, 1993). I show...

I address the dichotomy between American put option pricing theory and the numerical algorithms designed to estimate American put option prices. The literature has focused only on pricing error. However, early exercise is the essence of American option pricing (exercising) and with it comes the...

Why is risk-neutral valuation (RNV), after all this time, still so hard to understand? Many have a hard time understanding, and therefore accepting the concept. This paper seeks to clarify the issue by interpreting some of the insights provided by the fundamental theorems of asset pricing, while...