IDEAS home Printed from https://ideas.repec.org/p/arx/papers/1009.3556.html
   My bibliography  Save this paper

Perpetual Cancellable American Call Option

Author

Listed:
  • Thomas J. Emmerling

Abstract

This paper examines the valuation of a generalized American-style option known as a Game-style call option in an infinite time horizon setting. The specifications of this contract allow the writer to terminate the call option at any point in time for a fixed penalty amount paid directly to the holder. Valuation of a perpetual Game-style put option was addressed by Kyprianou (2004) in a Black-Scholes setting on a non-dividend paying asset. Here, we undertake a similar analysis for the perpetual call option in the presence of dividends and find qualitatively different explicit representations for the value function depending on the relationship between the interest rate and dividend yield. Specifically, we find that the value function is not convex when $r>d$. Numerical results show the impact this phenomenon has upon the vega of the option.

Suggested Citation

  • Thomas J. Emmerling, 2010. "Perpetual Cancellable American Call Option," Papers 1009.3556, arXiv.org.
    • Handle: RePEc:arx:papers:1009.3556
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/1009.3556
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Said Hamadene & Jianfeng Zhang, 2008. "The Continuous Time Nonzero-sum Dynkin Game Problem and Application in Game Options," Papers 0810.5698, arXiv.org.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Giovanni Mottola, 2014. "Generalized Dynkin game of switching type representation for defaultable claims in presence of contingent CSA," Papers 1410.0594, arXiv.org, revised Jan 2015.
    2. Giovanni Mottola, 2014. "Reflected Backward SDE approach to the price-hedge of defaultable claims with contingent switching CSA," Papers 1412.1325, arXiv.org, revised Feb 2015.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:1009.3556. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.