The Russian option: Finite horizon
AbstractWe show that the optimal stopping boundary for the Russian option with finite horizon can be characterized as the unique solution of a nonlinear integral equation arising from the early exercise premium representation (an explicit formula for the arbitrage-free price in terms of the optimal stopping boundary having a clear economic interpretation). The results obtained stand in a complete parallel with the best known results on the American put option with finite horizon. The key argument in the proof relies upon a local time-space formula. Copyright Springer-Verlag Berlin/Heidelberg 2005
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Bibliographic InfoArticle provided by Springer in its journal Finance and Stochastics.
Volume (Year): 9 (2005)
Issue (Month): 2 (04)
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Web page: http://www.springerlink.com/content/101164/
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- Tiziano De Angelis & Giorgio Ferrari, 2013. "A Stochastic Reversible Investment Problem on a Finite-Time Horizon: Free Boundary Analysis," Working Papers 477, Bielefeld University, Center for Mathematical Economics.
- Gapeev, P.V. & Peskir, G., 2006. "The Wiener disorder problem with finite horizon," Stochastic Processes and their Applications, Elsevier, vol. 116(12), pages 1770-1791, December.
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