The critical price for the American put in an exponential Lévy model (Q2271721): Difference between revisions

The purpose of this paper is to clarify the basic properties of the early exercise boundary of the American put on a dividend paying stock in general exponential Lévy models. To this end, the price of the American option is characterized as the unique solution of a variational inequality in the sense of distributions. This enables to recover the results of \textit{S.~Z.~Levendorskiĭ} [Int. J. Theor. Appl. Finance 7, No. 3, 303--335 (2004; Zbl 1107.91050)] and to prove the continuity of the early exercise boundary. The assumptions on the Lévy measure are less stringent than in previous papers devoted to this problem.