American options under periodic exercise opportunities
Probability
2017-12-27 v2
Abstract
In this paper, we study a version of the perpetual American call/put option where exercise opportunities arrive only periodically. Focusing on the exponential L\'evy models with i.i.d. exponentially-distributed exercise intervals, we show the optimality of a barrier strategy that exercises at the first exercise opportunity at which the asset price is above/below a given barrier. Explicit solutions are obtained for the cases the underlying L\'evy process has only one-sided jumps.
Keywords
Cite
@article{arxiv.1708.04163,
title = {American options under periodic exercise opportunities},
author = {José Luis Pérez and Kazutoshi Yamazaki},
journal= {arXiv preprint arXiv:1708.04163},
year = {2017}
}