From perpetual strangles to Russian options (Q1892983)

From MaRDI portal
Revision as of 14:05, 23 May 2024 by ReferenceBot (talk | contribs) (‎Changed an Item)
(diff) ← Older revision | Latest revision (diff) | Newer revision → (diff)
scientific article
Language Label Description Also known as
English
From perpetual strangles to Russian options
scientific article

    Statements

    From perpetual strangles to Russian options (English)
    0 references
    3 July 1995
    0 references
    Let \(\{S(t); t\geq 0\}\) be a geometric Brownian motion modeling the stock price process. Define the process \(M(t) = \max \{M, \max[S(u)\mid 0 \leq u \leq t]\}\), \(t \geq 0\), where \(M \geq S(0)\). \(M(t)\) is called the historical maximum of the stock prices up to time \(t\). The `Russian option' is a perpetual American option such that, if its owner exercises it at time \(t \geq 0\), he receives the amount \(M(t)\) at that time. The price at time 0 of the option is the supremum, over all stopping times \(T\), of \(E[\text{exp} (-rT) M(T)]\). The authors derive two pricing formulas by means of the optional sampling theorem. In particular, an alternative derivation of the Shepp-Shiryaev pricing formula for Russian option is provided.
    0 references
    geometric Brownian motion modeling the stock price process
    0 references
    historical maximum of the stock prices
    0 references
    optional sampling theorem
    0 references
    pricing formula for Russian option
    0 references
    0 references
    0 references
    0 references
    0 references
    0 references

    Identifiers