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Rubinstein pricing model

An option pricing model that takes into consideration the early exercise provision of the American style options. As it assumes that early exercise will occur only if the advantage of holding the currency exceeds the time value of the option, their binomial method evaluated the CALL premium by estimating the probability of early exercise for each successive day.The theoretical premium is compared to the holding cost of the cash hedge position, until the option´s time value is worth less than the forward points of the currency hedge and the option should be exercised.

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