Integral Options in Models with Jumps

We present an explicit solution to the formulated in [17] optimal stopping problem for a geometric compound Poisson process with exponential jumps. The method of proof is based on reducing the initial problem to an integro-differential free-boundary problem where the smooth fit may break down and then be replaced by the continuous fit. The result can be interpreted as pricing perpetual integral options in a model with jumps.

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Year of publication:	2006-09
Authors:	Gapeev, Pavel V.
Institutions:	Sonderforschungsbereich 649: Ökonomisches Risiko, Wirtschaftswissenschaftliche Fakultät
Subject:	Jump process \| stochastic differential equation \| optimal stopping problem \| integral American option \| compound Poisson process \| Shiryaev´s process \| Girsanov´s theorem \| Ito´s formula \| integrodifferential free-boundary problem \| smooth and continuous fit \| hypergeometric functions

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Extent:	application/pdf
Series:	SFB 649 Discussion Papers.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number SFB649DP2006-068 18 pages
Classification:	G13 - Contingent Pricing; Futures Pricing
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005678045