Recovering a time-homogeneous stock price process from perpetual option prices
AbstractIt is well known how to determine the price of perpetual American options if the underlying stock price is a time-homogeneous diffusion. In the present paper we consider the inverse problem, that is, given prices of perpetual American options for different strikes, we show how to construct a time-homogeneous stock price model which reproduces the given option prices.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 0903.4833.
Date of creation: Mar 2009
Date of revision: Nov 2012
Publication status: Published in Annals of Applied Probability 2011, Vol. 21, No. 3, 1102-1135
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Web page: http://arxiv.org/
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-09-26 (All new papers)
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