A new form of the early exercise premium for American type derivatives. (June 2019) - Zaevski, Tsvetelin S.
Highlights: Finding a new form of the early exercise premium for American derivatives. Stating the second form of this premium. Deriving the form for the American put. Working in a quite large framework. Giving an example for a discontinuous payment structure - convertible bond. Abstract: The purpose of this short paper is to present a new form of the so called early exercise premium for the American type derivatives. The decomposition we derived consists of the corresponding European derivative and a derivative with a stochastic maturity. In different particular cases we reach to the well known form for the American put option where the underlying asset is driven by a Brownian motion or a Lévy process.