Application of Compound Options in the Evaluation of American Puts

In this article, a numerical method is developed to determine the value of a put, based in the solution of Black and Scholes (1973) for European option and on Richardson extrapolation that calculates the limit of an options sequence, whose time intervals tend to zero. In the beginning of the 70s, Black and Scholes (1973) and Merton (1973) they had developed partial differential equation, whose solution it determines the value of an European option. The boundary condition will go to determine the type of option (purchase or sale). Values for the put are calculated, priced and compared with methods of the numerical integration and the binomial approach.