Recovering a time-homogeneous stock price process from perpetual option prices
It 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.
|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|
|Contact details of provider:|| Web page: http://arxiv.org/|
When requesting a correction, please mention this item's handle: RePEc:arx:papers:0903.4833. 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 references are entirely missing, you can add them using this form.