A direct solution method for pricing options involving the maximum process (Q2412388): Difference between revisions
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Revision as of 07:04, 5 March 2024
scientific article
| Language | Label | Description | Also known as |
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| English | A direct solution method for pricing options involving the maximum process |
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A direct solution method for pricing options involving the maximum process (English)
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23 October 2017
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The authors provide explicit solutions for optimal stopping problems related to a diffusion process and its running maximum. They use excursion theory for Markov processes and reformulate the original two-dimensional problem as an infinite number of one-dimensional ones. The solution method does not suppose the existence of an optimal threshold and does not impose a smooth-fit condition. The authors illustrate the method through classical and new examples.
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American options with maximum process
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optimal stopping
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excursion theory
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diffusions
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