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Explain Why It Is Impossible to Derive An Analytical Formula For Valuing American Explain why it has proved impossible to derive an analytical formula for valuing American Puts, and outline the main techniques that are used to produce approximate valuations for su ....

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.... by academics that it is impossible to derive an analytical formula for valuing American put options and the reason why will be discussed in this paper as well as some main suggested techniques that are used to value them. According to Hull, exercising an American put option on a non-dividend-paying stock early if it is sufficiently deeply in the money can be an optimal practice. For example, suppose that the strike price of an American option is $20 and the stock price is virtually zero. By exercising early at this point of time, an investor makes an immediate gain of $20. On the contrary, if the investor waits, he might not be able to get as m ....