An Optimal Stopping Problem in a Diffusion-Type Model with Delay

We present an explicit solution to an optimal stopping problem in a model described by a stochastic delay differential equation with an exponential delay measure. The method of proof is based on reducing the initial problem to a free-boundary problem and solving the latter by means of the smooth-fit condition. The problem can be interpreted as pricing special perpetual average American put options in a diffusion-type model with delay.

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Year of publication:	2005-02-10
Authors:	Gapeev, Pavel V. ; Reiß, Markus
Institutions:	Sonderforschungsbereich Ökonomisches Risiko <Berlin>
Subject:	Stochastik \| Differentialgleichung \| Streuung \| price dispersion

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Extent:	302080 bytes 12 p. application/pdf
Series:	Sonderforschungsbereich 649: Ökonomisches Risiko - Diskussionspapiere Diskussionspapier ; 2005-005
Type of publication:	Book / Working Paper
Language:	English
Classification:	Corporate finance and investment policy. Other aspects ; Individual Working Papers, Preprints ; No country specification
Source:	USB Cologne (business full texts)

Persistent link: https://www.econbiz.de/10005862332