Article ID Journal Published Year Pages File Type
4624186 Journal of Mathematical Analysis and Applications 2006 14 Pages PDF
Abstract

We show that the American put option price is log-concave as a function of the log-price of the underlying asset. Thus the elasticity of the price decreases with increasing stock value. We also consider related contracts of American type, and we provide an example showing that not all American option prices are log-concave in the stock log-price.

Related Topics
Physical Sciences and Engineering Mathematics Analysis