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Explain Why It Is Impossible To Derive An Analytical Formula For Valuing American Puts.
Beginning of paper
Explain Why It Is Impossible to Derive An Analytical Formula For Valuing American
Explain why it has 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 hedg .... Middle of paper
.... some main suggested
techniques that are used to value them.
According to Hull, exercising an American 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 inv ....
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Number of words: 1728
Number of pages: 7 (approx. 250 words per double-spaced page)
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