It is also known that the value of a European put cannot be greater than...
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Accounting
It is also known that the value of a European put cannot be greater than the
present value of its exercise price, i.e. 0. This restriction, along with the one in (c), suggests that the price of a European put can fall below its exercise value prior to maturity. When is this situation likely to arise? Give an intuitive explanation as to why its value is below its exercise value in such
circumstances.
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