Advanced Search
MyIDEAS: Login to save this paper or follow this series

Error estimates for binomial approximations of game options

Contents:

Author Info

  • Yuri Kifer
Registered author(s):

    Abstract

    We justify and give error estimates for binomial approximations of game (Israeli) options in the Black--Scholes market with Lipschitz continuous path dependent payoffs which are new also for usual American style options. We show also that rational (optimal) exercise times and hedging self-financing portfolios of binomial approximations yield for game options in the Black--Scholes market ``nearly'' rational exercise times and ``nearly'' hedging self-financing portfolios with small average shortfalls and initial capitals close to fair prices of the options. The estimates rely on strong invariance principle type approximations via the Skorokhod embedding.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://arxiv.org/pdf/math/0607123
    File Function: Latest version
    Download Restriction: no

    Bibliographic Info

    Paper provided by arXiv.org in its series Papers with number math/0607123.

    as in new window
    Length:
    Date of creation: Jul 2006
    Date of revision:
    Publication status: Published in Annals of Applied Probability 2006, Vol. 16, No. 2, 984-1033
    Handle: RePEc:arx:papers:math/0607123

    Contact details of provider:
    Web page: http://arxiv.org/

    Related research

    Keywords:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Gapeev Pavel V. & Kühn Christoph, 2005. "Perpetual convertible bonds in jump-diffusion models," Statistics & Risk Modeling, De Gruyter, De Gruyter, vol. 23(1/2005), pages 15-31, January.
    2. L.C.G. Rogers & E.J. Stapleton, 1997. "Fast accurate binomial pricing," Finance and Stochastics, Springer, vol. 2(1), pages 3-17.
    3. Friedrich Hubalek & Walter Schachermayer, 1998. "When Does Convergence of Asset Price Processes Imply Convergence of Option Prices?," Mathematical Finance, Wiley Blackwell, Wiley Blackwell, vol. 8(4), pages 385-403.
    4. Andreas Kyprianou, 2004. "Some calculations for Israeli options," Finance and Stochastics, Springer, vol. 8(1), pages 73-86, January.
    5. Kaushik Amin & Ajay Khanna, 1994. "Convergence Of American Option Values From Discrete- To Continuous-Time Financial Models," Mathematical Finance, Wiley Blackwell, Wiley Blackwell, vol. 4(4), pages 289-304.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Y. Iron & Y. Kifer, 2012. "Error estimates for binomial approximations of game put options," Papers 1206.0153, arXiv.org, revised Oct 2013.
    2. Yuri Kifer, 2012. "Dynkin Games and Israeli Options," Papers 1209.1791, arXiv.org.
    3. Yuri Kifer, 2007. "Correction. Error estimates for binomial approximations of game options," Papers math/0702423, arXiv.org.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:arx:papers:math/0607123. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (arXiv administrators).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.