A new explicit form is provided for the solution of optimal stopping problems involving a multidimensional geometric Brownian motion. A free-boundary value approach is adopted and the value function is obtained via fundamental solution methods. There are many applications for the valuation of...

Accurately as well as efficiently calculating the early exercise boundary is the key to the highly nonlinear problem of pricing American options. Many analytical approximations have been proposed in the past, aiming at improving the computational efficiency and the easiness of using the formula,...

This Paper analyses corporate bond valuation and optimal call and default rules when interest rates and firm value are stochastic. It then uses the results to explain the dynamics of hedging. Bankruptcy rules are important determinants of corporate bond sensitivity to interest rates and firm...