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Use the result in equation (15.17) to determine the value of a perpetual American put option...

Use the result in equation (15.17) to determine the value of a perpetual American put option on a non-dividend-paying stock with strike price K if it is exercised when the stock price equals H where H < K. Assume the current stock price S is greater than H. What is the value of H that maximizes the option value? Deduce the value of a perpetual American put with strike price K.

15.17

f = Q (S/H)^(-2r/sigma^2)

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