A parabolic variational inequality related to the perpetual American executive stock options

DOI10.1016/J.NA.2011.06.042MaRDI QIDQ640189zbMATH OpenOpenAlexFDO

Authors Liping Song, Wanghui Yu

Publication date 17 October 2011

Published in Nonlinear Analysis. Theory, Methods \& Applications. Series A: Theory and Methods (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1016/j.na.2011.06.042

zbMATH Keywords

existenceregularitytime discretizationuniqueness

Mathematics Subject Classification ID

Other special methods applied to PDEs (35A25) Unilateral problems for nonlinear parabolic equations and variational inequalities with nonlinear parabolic operators (35K86) PDEs in connection with game theory, economics, social and behavioral sciences (35Q91) Free boundary problems for PDEs (35R35)

Review text

A certain parabolic variational inequality originating from the study of the optimal strategy related to the American executive stock exchange options in financial markets is studied. The authors introduce the problem which is quite involved and provide a result concerning the existence, the uniqueness and regularity of solutions. The problem is solved via appropriate time discretization methods along with convergence approach that is possible in view given estimates.

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Cites work

• ACCOUNTING FOR RISK AVERSION, VESTING, JOB TERMINATION RISK AND MULTIPLE EXERCISES IN VALUATION OF EMPLOYEE STOCK OPTIONS
• Horizon-unbiased utility functions
• scientific article; zbMATH DE number 41299 (Why is no real title available?)
• Optimal exercise of executive stock options
• Risk aversion and block exercise of executive stock options

Cited in

(9)

• The uniqueness of the solution for the definite problem of a parabolic variational inequality
• Asymptotic behavior of optimal exercise strategy for a small number of executive stock options
• Parabolic variational inequalities: the Lagrange multiplier approach
• Regularity of free boundary arising from optimal exercise of perpetual executive stock options
• A free boundary problem coming from the perpetual American call options with utility
• A variational inequality arising from optimal exercise perpetual executive stock options
• Mathematical analysis of a variational inequality modelling perpetual executive stock options
• A free boundary problem coming from the perpetual American ESOs
• A parabolic variational inequality arising from the valuation of strike reset options

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