Journal of Business & Financial Affairs

A Note on the Pricing of American Capped Power Put Option

Abstract

Yoshitaka Sakagami

We give an explicit solution to the perpetual American capped power put option pricing problem in the BlackScholes-Merton Model. The approach is mainly based on free-boundary formulation and verification. For completeness we also give an explicit solution to the perpetual American standard power (_ 1) option pricing problem.