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Abstract

In this paper we consider the Garman-Kohlhagen model for the American foreign exchange put option in one-dimensional diffusion model where the volatility and the domestic and foreign currency risk-free interest rates are constants. First we make preliminary estimate regarding the optimal exercise boundary of the American foreign exchange put option and then the continuity estimate with respect to volatility for the value functions of the corresponding options. Finally we establish the continuity estimate for the optimal exercise boundary of the American foreign exchange put option with respect to the volatility parameter.