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Pricing of perpetual Bermudan options

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  • S. I. Boyarchenko
  • S. Z. Levendorskii

Abstract

We consider perpetual Bermudan options and more general perpetual American options in discrete time. For wide classes of processes and pay-offs, we obtain exact analytical pricing formulae in terms of the factors in the Wiener-Hopf factorization formulae. Under additional conditions on the process, we derive simpler approximate formulae.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/14697688.2002.0000010
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Quantitative Finance.

Volume (Year): 2 (2002)
Issue (Month): 6 ()
Pages: 432-442

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Handle: RePEc:taf:quantf:v:2:y:2002:i:6:p:432-442

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Web page: http://www.tandfonline.com/RQUF20

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Cited by:
  1. Svetlana Boyarchenko & Sergei Levendorskii, 2005. "Practical guide to real options in discrete time II," Finance 0501014, EconWPA.
  2. Yoshifumi Muroi & Takashi Yamada, 2008. "An Explicit Finite Difference Approach to the Pricing Problems of Perpetual Bermudan Options," Asia-Pacific Financial Markets, Springer, vol. 15(3), pages 229-253, December.
  3. Svetlana Boyarchenko & Sergey Levendorskiy, 2004. "Optimal stopping made easy," Finance 0410016, EconWPA.
  4. Svetlana Boyarchenko & Sergei Levendorskii, 2004. "Practical guide to real options in discrete time," Finance 0405016, EconWPA.

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