Early Exercise of American Call Options under Negative Interest Rates

17 Pages Posted: 30 Jun 2021

See all articles by Jochen Schneider

Jochen Schneider

Technische Universität Kaiserslautern

Nils Helms

University of Kaiserslautern

Date Written: May 27, 2021

Abstract

Although negative interest rates have been a phenomenon observed in capital markets for years, little research has been done on the impact of negative interest rates on stock option valuations. This paper shows that the fundamental assumption of equivalence between American and European call options at negative riskless interest rates is no longer universal. The findings are illustrated by means of an example. Furthermore, there are implications for practical trading with options.

Keywords: Negative Interest Rates, Early Exercise, Call Options, Options, Option Valuation

JEL Classification: G10, G13,

Suggested Citation

Schneider, Jochen and Helms, Nils, Early Exercise of American Call Options under Negative Interest Rates (May 27, 2021). Available at SSRN: https://ssrn.com/abstract=3854489 or http://dx.doi.org/10.2139/ssrn.3854489

Jochen Schneider

Technische Universität Kaiserslautern ( email )

Gottlieb-Daimler-Straße 47
Kaiserslautern, DE 67663

Nils Helms (Contact Author)

University of Kaiserslautern ( email )

Paul-Ehrlich-Straße 14
Kaiserslautern, D-67663
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
31
Abstract Views
125
PlumX Metrics