The randomized American option as a classical solution to the penalized problem

DOI10.1155/2015/245436MaRDI QIDQ898213zbMATH OpenOpenAlexWikidataFDO

Authors Guillaume Leduc

Publication date 8 December 2015

Published in Journal of Function Spaces (Search for Journal in Brave)

Copyright license Creative Commons Attribution 3.0 Unported

Full work available at URL https://doi.org/10.1155/2015/245436

Mathematics Subject Classification ID

Stopping times; optimal stopping problems; gambling theory (60G40) Derivative securities (option pricing, hedging, etc.) (91G20)

Review text

Summary: We connect the exercisability randomized American option to the penalty method by showing that the randomized American option value \(u\) is the unique classical solution to the Cauchy problem corresponding to the canonical penalty problem for American options. We also establish a uniform bound for \(Au\), where \(A\) is the infinitesimal generator of a geometric Brownian motion.

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Cites work

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• Exercisability Randomization of the American Option
• scientific article; zbMATH DE number 6136940 (Why is no real title available?)
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Cited in

(1)

• Exercisability Randomization of the American Option

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