| Article ID | Journal | Published Year | Pages | File Type |
|---|---|---|---|---|
| 1709222 | Applied Mathematics Letters | 2011 | 8 Pages |
Abstract
We consider an American put option under the CEV process. This corresponds to a free boundary problem for a PDE. We show that this free boundary satisfies a nonlinear integral equation, and analyze it in the limit of small ρ=2r/σ2ρ=2r/σ2, where rr is the interest rate and σσ is the volatility. We use perturbation methods to find that the free boundary behaves differently for five ranges of time to expiry.
Related Topics
Physical Sciences and Engineering
Engineering
Computational Mechanics
Authors
Miao Xu, Charles Knessl,