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The Valuation Of Russian Options For Double Exponential Jump Diffusion Processes

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  • ATSUO SUZUKI

    () (Faculty of Urban Science, Meijo University, Kani-shi, 509-0261, Japan)

  • KATSUSHIGE SAWAKI

    () (Nanzan Business School, Nagoya-Shi, 466-8673, Japan)

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    Abstract

    In this paper, we derive closed form solution for Russian option with jumps. First, we discuss the pricing of Russian options when the stock pays dividends continuously. Secondly, we derive the value function of Russian options by solving the ordinary differential equation with some conditions (the value function is continuous and differentiable at the optimal boundary for the buyer). And we investigate properties of optimal boundaries of the buyer. Finally, some numerical results are presented to demonstrate analytical properties of the value function.

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    Bibliographic Info

    Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal Asia-Pacific Journal of Operational Research.

    Volume (Year): 27 (2010)
    Issue (Month): 02 ()
    Pages: 227-242

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    Handle: RePEc:wsi:apjorx:v:27:y:2010:i:02:p:227-242

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    Related research

    Keywords: Russian option; jump diffusion process;

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