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The critical price of the American put near maturity in the jump diffusion model

Aych Bouselmi 1, 2 Damien Lamberton 1, 2
2 MATHRISK - Mathematical Risk handling
Inria Paris-Rocquencourt, UPEM - Université Paris-Est Marne-la-Vallée, ENPC - École des Ponts ParisTech
Abstract : We study the behavior of the critical price of an American put option near maturity in the Jump diffusion model when the underlying stock pays dividends at a continuous rate and the limit of the critical price is smaller than the stock price. In particular, we prove that, unlike the case where the limit is equal to the strike price, jumps can influence the convergence rate.
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Aych Bouselmi, Damien Lamberton. The critical price of the American put near maturity in the jump diffusion model. SIAM Journal on Financial Mathematics, Society for Industrial and Applied Mathematics 2016, 7 (1), pp.236-272. ⟨10.1137/140965910⟩. ⟨hal-00979936v2⟩

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