Volatility and Dividend Risk in Perpetual American Options
نویسندگان
چکیده
منابع مشابه
Volatility and dividend risk in perpetual American options
American options are financial instruments that can be exercised at any time before expiration. In this paper we study the problem of pricing this kind of derivatives within a framework in which some of the properties —volatility and dividend policy— of the underlaying stock can change at a random instant of time, but in such a way that we can forecast the final conditions. These peculiar assum...
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Continuous-time random walks are a well suited tool for the description of market behaviour at the smallest scale: the tick-to-tick evolution. We will apply this kind of market model to the valuation of perpetual American options: derivatives with no maturity that can be exercised at any time. Our approach leads to option prices that fulfil financial formulas when canonical assumptions on the d...
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In this paper, we investigate the generalization of the Call-Put duality equality obtained in [1] for perpetual American options when the Call-Put payoff (y − x)+ is replaced by φ(x, y). It turns out that the duality still holds under monotonicity and concavity assumptions on φ. The specific analytical form of the Call-Put payoff only makes calculations easier but is not crucial unlike in the d...
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We prove that the perpetual American put option price of level dependent volatility model with compound Poisson jumps is convex and is the classical solution of its associated quasi-variational inequality, that it is C except at the stopping boundary and that it is C everywhere (i.e. the smooth pasting condition always holds).
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We provide a comprehensive treatement of option pricing with particular emphasis on the valuation of American options on dividend-paying assets. We begin by reviewing valuation principles for European contingent claims in a financial market in which the underlying asset price follows an Itô process and the interest rate is stochastic. Then this analysis is extended to the valuation of American ...
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ژورنال
عنوان ژورنال: SSRN Electronic Journal
سال: 2007
ISSN: 1556-5068
DOI: 10.2139/ssrn.943045