Work

On perpetual American options in a multidimensional Black–Scholes model

Year: 2021

Type: article

Abstract: 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 probabilistic characterization of the fair price in terms of a reflected BSDE, and an analytical one in terms of an obstacle problem. We also provide the early exercise premium formula.

Source: Stochastics

DOI: 10.1080/17442508.2021.1993444

Author: Andrzej Rozkosz

Institution: Nicolaus Copernicus University

Language: English

Topic: Stochastic processes and financial applications

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

Funder: Narodowe Centrum Nauki

Award: G7024459161