Optimal stopping and reselling of European options. (English) Zbl 1405.91641
Rykov, Vladimir V. (ed.) et al., Mathematical and statistical models and methods in reliability. Applications to medicine, finance, and quality control. Invited papers based on the presentation at the 6th international conference (MMR 2009), Moscow, Russia, June 22–26, 2009. Boston, MA: Birkhäuser (ISBN 978-0-8176-4970-8/hbk; 978-0-8176-4971-5/ebook). Statistics for Industry and Technology, 371-389 (2010).
Summary: We consider the problem of optimal reselling of European options. A bivariate exponential diffusion process is used to describe the reselling model. In this way, the reselling problem is imbedded to the model of finding optimal reward for American type option based on this process. Convergence results are formulated for optimal reward functionals of American type options for perturbed multi-variate Markov processes. An approximation bivariate tree model is constructed and convergence of optimal expected reward for this tree model to the optimal expected reward for the corresponding reselling model is proved.
For the entire collection see [Zbl 1203.60007].
For the entire collection see [Zbl 1203.60007].
MSC:
| 91G20 | Derivative securities (option pricing, hedging, etc.) |
| 60G40 | Stopping times; optimal stopping problems; gambling theory |
| 60H30 | Applications of stochastic analysis (to PDEs, etc.) |
Keywords:
American option; binomial-trinomial approximation; convergence; European option; optimal stopping; reselling problemReferences:
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