An integral equation for American put options on assets with general dividend processes

M. H. Vellekoop*, J. W. Nieuwenhuis

*Corresponding author for this work

    Research output: Contribution to journalArticleAcademicpeer-review

    2 Citations (Scopus)


    The difference between an American put option and its European counterpart has been characterized in terms of a simple integral expression which can be used to calculate the optimal exercise boundary in a recursive manner, if Black-Scholes dynamics are assumed for the underlying asset. In this paper, we extend this formula to the case where a more general stock and cumulative dividend process are included, and show how this changes the properties of the optimal exercise boundary.

    Original languageEnglish
    Pages (from-to)555-567
    Number of pages13
    JournalStochastics-An international journal of probability and stochastic processes
    Issue number4-6
    Publication statusPublished - 2011


    • American option
    • early exercise premium
    • dividends

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