On perpetual American options in a multidimensional Black-Scholes model

DOI10.1080/17442508.2021.1993444MaRDI QIDQ5094573zbMATH OpenOpenAlexFDO

Authors Andrzej Rozkosz

Publication date 3 August 2022

Published in Stochastics (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1901.00308

zbMATH Keywords

backward stochastic differential equationobstacle problemperpetual American option

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Stopping times; optimal stopping problems; gambling theory (60G40) Applications of stochastic analysis (to PDEs, etc.) (60H30)

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.

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Cited in

(8)

• Shortfall risk approximations for American options in the multidimensional Black-Scholes model
• On the pricing of perpetual American compound options
• scientific article; zbMATH DE number 7596554 (Why is no real title available?)
• The early exercise premium representation for American options on multiply assets
• Analytical and Numerical Results for American Style of Perpetual Put Options Through Transformation into Nonlinear Stationary Black-Scholes Equations
• scientific article; zbMATH DE number 7158115 (Why is no real title available?)
• Perpetual options on multiple underlyings
• Valuation of performance-dependent options in a Black-Scholes framework

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