The critical price for the American put in an exponential Levy model

Damien Lamberton (1) , Mohammed Mikou (1)

1 LAMA - Laboratoire d'Analyse et de Mathématiques Appliquées

This paper considers the behavior of the critical price for the American put in the exponential Levy model when the underlying stock pays dividends at a continuous rate. We prove the continuity of the free boundary and give a characterization of the critical price at maturity, generalizing a recent result of S.Z. Levendorskii (Int. J. Theor. Appl. Finance 7:303-336, 2004).

Damien Lamberton, Mohammed Mikou. The critical price for the American put in an exponential Levy model. Finance and Stochastics, 2008, 12 (4), pp.561--581. ⟨10.1007/s00780-008-0073-9⟩. ⟨hal-00693063⟩