IDEAS home Printed from https://ideas.repec.org/p/arx/papers/math-0607123.html
   My bibliography  Save this paper

Error estimates for binomial approximations of game options

Author

Listed:
  • Yuri Kifer

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.

Suggested Citation

  • Yuri Kifer, 2006. "Error estimates for binomial approximations of game options," Papers math/0607123, arXiv.org.
  • Handle: RePEc:arx:papers:math/0607123
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/math/0607123
    File Function: Latest version
    Download Restriction: no

    References listed on IDEAS

    as
    1. Friedrich Hubalek & Walter Schachermayer, 1998. "When Does Convergence of Asset Price Processes Imply Convergence of Option Prices?," Mathematical Finance, Wiley Blackwell, vol. 8(4), pages 385-403.
    2. Kaushik Amin & Ajay Khanna, 1994. "Convergence Of American Option Values From Discrete- To Continuous-Time Financial Models," Mathematical Finance, Wiley Blackwell, vol. 4(4), pages 289-304.
    3. Andreas Kyprianou, 2004. "Some calculations for Israeli options," Finance and Stochastics, Springer, vol. 8(1), pages 73-86, January.
    4. Gapeev Pavel V. & Kühn Christoph, 2005. "Perpetual convertible bonds in jump-diffusion models," Statistics & Risk Modeling, De Gruyter, vol. 23(1/2005), pages 15-31, January.
    5. L.C.G. Rogers & E.J. Stapleton, 1997. "Fast accurate binomial pricing," Finance and Stochastics, Springer, vol. 2(1), pages 3-17.
    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


    Cited by:

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

    More about this item

    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: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). General contact details of provider: http://arxiv.org/ .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.