CALLABLE PUTS AS COMPOSITE EXOTIC OPTIONS

DOI Web Site Web Site 1 Citations

Description

<jats:p>Introduced by <jats:ext-link xmlns:xlink="http://www.w3.org/1999/xlink" xlink:href="#b6">Kifer (2000)</jats:ext-link>, game options function in the same way as American options with the added feature that the writer may also choose to exercise, at which time they must pay out the intrinsic option value of that moment plus a penalty. In <jats:ext-link xmlns:xlink="http://www.w3.org/1999/xlink" xlink:href="#b9">Kyprianou (2004)</jats:ext-link> an explicit formula was obtained for the value function of the perpetual put option of this type. Crucial to the calculations which lead to the aforementioned formula was the perpetual nature of the option. In this paper we address how to characterize the value function of the <jats:italic>finite expiry</jats:italic> version of this option via mixtures of other exotic options by using mainly martingale arguments.</jats:p>

Journal

Citations (1)*help

See more

Report a problem

Back to top