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Explain Why It Is Impossible To Derive An Analytical Formula For Valuing American Puts.
Part 1 of Paper
....s 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 options is a way used by investors to hedge against risk. It
is simply because all the investors could lose if the option.... Part 2 of Paper
....ican put option on a non-dividend-paying
stock early if it is sufficiently deeply in the money can be an optimal practice.
For example, suppose that the strike price of an American option is $20 and the
stock price is virtually zero. By exercising early at this point of time, an
investor makes an immediate gain of $20. On the contrary, if the investor waits,
he might not be able to get as much as $20 gain since negative stock prices are
impossible. Therefore it implies that if the share price.... |
| Number of words: 1728 - Approximate pages: 7 |
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