<t>Ah, I think I got it this time.Your B_t has two meanings, first the discounting function and second an abbreviation for the second term on the right hand side. Got a bit confused about this first.Looks like you're right about the stopping time. This would mean that the proof of the convexity is m...

<t>Thank you both for your replies.@AlanRegarding your last point, C_SS = C_KK; this is not true for European Calls, so why should it be for American Calls?For European:C_SS (=gamma) = N(d1)*exp(-rT)/(S*sigma*sqrt(T))C_KK = N(d2)*exp(-rT)/(K*sigma*sqrt(T))Both are > 0, which means that the price is ...

<t>Could someone please give me an evidence (or where to find an evidence) if (and if so, then why) prices of an American Call on a dividend paying underlying are convex in the strike?!I've browsed the internet and found a few hints, but not a real prove.What I found is that "it is well known" that ...