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4 May 2001 On the optimal exercise boundary for an American put option
Ghada Alobaidi, Roland Mallier
J. Appl. Math. 1(1): 39-45 (4 May 2001). DOI: 10.1155/S1110757X01000018


An American put option is a derivative financial instrument that gives its holder the right but not the obligation to sell an underlying security at a pre-determined price. American options may be exercised at any time prior to expiry at the discretion of the holder, and the decision as to whether or not to exercise leads to a free boundary problem. In this paper, we examine the behavior of the free boundary close to expiry. Working directly with the underlying PDE, by using asymptotic expansions, we are able to deduce this behavior of the boundary in this limit.


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Ghada Alobaidi. Roland Mallier. "On the optimal exercise boundary for an American put option." J. Appl. Math. 1 (1) 39 - 45, 4 May 2001.


Published: 4 May 2001
First available in Project Euclid: 24 March 2003

zbMATH: 0976.91029
MathSciNet: MR1844947
Digital Object Identifier: 10.1155/S1110757X01000018

Primary: 91B28

Rights: Copyright © 2001 Hindawi

Vol.1 • No. 1 • 4 May 2001
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