Open Access
Translator Disclaimer
August 2003 Perpetual options and Canadization through fluctuation theory
A. E. Kyprianou, M. R. Pistorius
Ann. Appl. Probab. 13(3): 1077-1098 (August 2003). DOI: 10.1214/aoap/1060202835

Abstract

In this article it is shown that one is able to evaluate the price of perpetual calls, puts, Russian and integral options directly as the Laplace transform of a stopping time of an appropriate diffusion using standard fluctuation theory. This approach is offered in contrast to the approach of optimal stopping through free boundary problems. Following ideas of Carr [Rev. Fin. Studies 11 (1998) 597--626], we discuss the Canadization of these options as a method of approximation to their finite time counterparts. Fluctuation theory is again used in this case.

Citation

Download Citation

A. E. Kyprianou. M. R. Pistorius. "Perpetual options and Canadization through fluctuation theory." Ann. Appl. Probab. 13 (3) 1077 - 1098, August 2003. https://doi.org/10.1214/aoap/1060202835

Information

Published: August 2003
First available in Project Euclid: 6 August 2003

zbMATH: 1039.60044
MathSciNet: MR1994045
Digital Object Identifier: 10.1214/aoap/1060202835

Subjects:
Primary: 60G40 , 60G99
Secondary: 60J65

Keywords: Bessel process , Brownian motion , call option , integral option , Laplace transform , option pricing , perpetual option , put option , Russian option , stopping time

Rights: Copyright © 2003 Institute of Mathematical Statistics

JOURNAL ARTICLE
22 PAGES


SHARE
Vol.13 • No. 3 • August 2003
Back to Top