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May 2018 American options with asymmetric information and reflected BSDE
Neda Esmaeeli, Peter Imkeller
Bernoulli 24(2): 1394-1426 (May 2018). DOI: 10.3150/16-BEJ902

Abstract

We consider an American contingent claim on a financial market where the buyer has additional information. Both agents (seller and buyer) observe the same prices, while the information available to them may differ due to some extra exogenous knowledge the buyer has. The buyer’s information flow is modeled by an initial enlargement of the reference filtration. It seems natural to investigate the value of the American contingent claim with asymmetric information. We provide a representation for the cost of the additional information relying on some results on reflected backward stochastic differential equations (RBSDE). This is done by using an interpretation of prices of American contingent claims with extra information for the buyer by solutions of appropriate RBSDE.

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Neda Esmaeeli. Peter Imkeller. "American options with asymmetric information and reflected BSDE." Bernoulli 24 (2) 1394 - 1426, May 2018. https://doi.org/10.3150/16-BEJ902

Information

Received: 1 May 2015; Revised: 1 September 2016; Published: May 2018
First available in Project Euclid: 21 September 2017

zbMATH: 06778368
MathSciNet: MR3706797
Digital Object Identifier: 10.3150/16-BEJ902

Rights: Copyright © 2018 Bernoulli Society for Mathematical Statistics and Probability

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Vol.24 • No. 2 • May 2018
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