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- Publisher
- Wiley
- Copyright
- Copyright © 1992 Wiley Subscription Services, Inc., A Wiley Company
- ISSN
- 0960-1627
- eISSN
- 1467-9965
- DOI
- 10.1111/j.1467-9965.1992.tb00040.x
- Publisher site
- See Article on Publisher Site
Abstract
We derive alternative representations of the McKean equation for the value of the American put option. Our main result decomposes the value of an American put option into the corresponding European put price and the early exercise premium. We then represent the European put price in a new manner. This representation allows us to alternatively decompose the price of an American put option into its intrinsic value and time value, and to demonstrate the equivalence of our results to the McKean equation.
Journal
Mathematical Finance – Wiley
Published: Apr 1, 1992