On the American style futures contracts (Q6546109)

This short paper deals with the valuation of \textit{American futures} contracts in the context of the Black-Scholes-Merton model. More specifically, the author considers a derivative with payoff function \(N(t,S_t)=e^{-\lambda t}(S_t-K)\), representing the payoff in the case of exercise at date \(t\), where \(\lambda\) is assumed to be an additional discount factor accounting for the possible presence of dividends. The author considers the problem in the perpetual case (infinite maturity) as well as in the case of finite maturity. In my view, the motivation for this study seems weak, since the author does not explain whether such contracts are actually traded in the markets. From a theoretical viewpoint, it is clear that in the perpetual case those contracts reduce to standard American call options, hence a difference (if any) can only emerge under finite maturity. It should also be mentioned that the author does not consider the presence of the mark-to-market mechanism, which cannot be ignored in the valuation of futures contracts.