Hostname: page-component-78c5997874-lj6df Total loading time: 0 Render date: 2024-11-05T02:39:36.201Z Has data issue: false hasContentIssue false

Bounds for the American perpetual put on a stock index

Published online by Cambridge University Press:  14 July 2016

V. Paulsen*
Affiliation:
Universität Kiel
*
Postal address: Universität Kiel, Mathematisches Seminar, Ludewig Meyn Str. 4, D-24098 Kiel, Germany. Email address: [email protected]

Abstract

Let us consider n stocks with dependent price processes each following a geometric Brownian motion. We want to investigate the American perpetual put on an index of those stocks. We will provide inner and outer boundaries for its early exercise region by using a decomposition technique for optimal stopping.

Type
Research Papers
Copyright
Copyright © by the Applied Probability Trust 2001 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Beibel, M., and Lerche, H. R. (1997). A new look at optimal stopping problems related to mathematical finance. Statist. Sinica 7, 93108.Google Scholar
Broadie, M., and Detemple, J. (1997). The valuation of American options on multiple assets. Math. Finance 7, 241286.CrossRefGoogle Scholar
Karatzas, I., and Shreve, S. E. (1998). Methods of Mathematical Finance. Springer, New York.Google Scholar
Lamperton, D., and Lapeyre, B. (1993). Hedging index options with few assets. Math. Finance 3, 2541.CrossRefGoogle Scholar
McKean, H. P. (1965). A free boundary problem for the heat equation arising from a problem in mathematical economics. Indust. Management Rev. 6, 3239.Google Scholar
Musiela, M., and Rutkowski, M. (1997). Martingale Methods in Financial Modelling. Springer, New York.CrossRefGoogle Scholar