The critical price for the American put in an exponential Lévy model (Q2271721): Difference between revisions
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English | The critical price for the American put in an exponential Lévy model |
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The critical price for the American put in an exponential Lévy model (English)
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8 August 2009
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The purpose of this paper is to clarify the basic properties of the early exercise boundary of the American put on a dividend paying stock in general exponential Lévy models. To this end, the price of the American option is characterized as the unique solution of a variational inequality in the sense of distributions. This enables to recover the results of \textit{S.~Z.~Levendorskiĭ} [Int. J. Theor. Appl. Finance 7, No. 3, 303--335 (2004; Zbl 1107.91050)] and to prove the continuity of the early exercise boundary. The assumptions on the Lévy measure are less stringent than in previous papers devoted to this problem.
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American options
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optimal stopping
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exponential Lévy model
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