Related papers: Volatility and dividend risk in perpetual American…
Perpetual American options are financial instruments that can be readily exercised and do not mature. In this paper we study in detail the problem of pricing this kind of derivatives, for the most popular flavour, within a framework in…
We study perpetual American option pricing problems in an extension of the Black-Merton-Scholes model in which the dividend and volatility rates of the underlying risky asset depend on the running values of its maximum and maximum drawdown.…
We introduce a simple stochastic volatility model, whose novelty consists in taking into account hitting times of the asset price, and study the optimal stopping problem corresponding to a put option whose time horizon (after the asset…
The aim of this study was to develop methods for evaluating the American-style option prices when the volatility of the underlying asset is described by a stochastic process. As part of this problem were developed techniques for modeling…
We study optimal stopping problems related to the pricing of perpetual American options in an extension of the Black-Merton-Scholes model in which the dividend and volatility rates of the underlying risky asset depend on the running values…
American options in a multi-asset market model with proportional transaction costs are studied in the case when the holder of an option is able to exercise it gradually at a so-called mixed (randomised) stopping time. The introduction of…
We consider the robust pricing and hedging of American options in a continuous time setting. We assume asset prices are continuous semimartingales, but we allow for general model uncertainty specification via adapted closed convex…
We consider the problem of valuation of American options written on dividend-paying assets whose price dynamics follows a multidimensional exponential Levy model. We carefully examine the relation between the option prices, related partial…
American options are studied in a general discrete market in the presence of proportional transaction costs, modelled as bid-ask spreads. Pricing algorithms and constructions of hedging strategies, stopping times and martingale…
This paper investigates problems associated with the valuation of callable American volatility put options. Our approach involves modeling volatility dynamics as a mean-reverting 3/2 volatility process. We first propose a pricing formula…
It is well-known that using delta hedging to hedge financial options is not feasible in practice. Traders often rely on discrete-time hedging strategies based on fixed trading times or fixed trading prices (i.e., trades only occur if the…
In this paper we analyze American style of floating strike Asian call options belonging to the class of financial derivatives whose payoff diagram depends not only on the underlying asset price but also on the path average of underlying…
A common assumption in financial engineering is that the market price for any derivative coincides with an objectively defined risk-neutral price - a plausible assumption only if traders collectively possess objective knowledge about the…
We study a market model in which the volatility of the stock may jump at a random time from a fixed value to another fixed value. This model was already described in the literature. We present a new approach to the problem, based on partial…
This study delves into the intricate realm of risk evaluation within the domain of specific financial derivatives, notably options. Unlike other financial instruments, like bonds, options are susceptible to broader risks. A distinctive…
We study the upper and lower bounds for prices of European and American style options with the possibility of an external termination, meaning that the contract may be terminated at some random time. Under the assumption that the underlying…
The virtue of an American option is that it can be exercised at any time. This right is particularly valuable when there is model uncertainty. Yet almost all the extensive literature on American options assumes away model uncertainty. This…
A variational inequality for pricing the perpetual American option and the corresponding difference equation are considered. First, the maximum principle and uniqueness of the solution to variational inequality for pricing the perpetual…
We analyze and calculate the early exercise boundary for a class of stationary generalized Black-Scholes equations in which the volatility function depends on the second derivative of the option price itself. A motivation for studying the…
We consider the problem of pricing perpetual American options written on dividend-paying assets whose price dynamics follow a multidimensional Black and Scholes model. For convex Lipschitz continuous reward functions, we give a…