American Put Early Exercise - Quant Trader Interview Question
Difficulty: Hard
Category: Options & Greeks
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Topics: options, american-put, early-exercise, interest-rates, volatility
Problem Description
You are holding an American put option on a non-dividend-paying stock. Under what market conditions is early exercise of this put option most likely to be optimal? Consider the interplay of intrinsic value, time value, and the opportunity cost of capital.
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