Has anyone come across and fixed calculation issues on boundaries using Bjerksund-Stensland 2002 (Hull, Haug or Rouah implementations) ? Thanks in advance


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Is your question about the early exercise boundary (B0 and B_inf)? The B0 boundary can be questionable when cost of carry is the same as risk free rate (r=b for options on non dividend-paying equity underlier). If cost of carry equals risk free rate, I will have to assume a small value for r-b to get the boundary B0.


  • $\begingroup$ Thank you for your comment. Put more simply, and considering current market variables (b>r), a SPY Put Credit Spread will be modelled incorrectly most likely due to B0. $\endgroup$
    – bruno
    Jul 17, 2020 at 5:18

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