IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

American options with multiple priors in continuous time

Listed author(s):
  • Vorbrink, Jörg

    (Center for Mathematical Economics, Bielefeld University)

Registered author(s):

    We investigate American options in a multiple prior setting of continuous time and determine optimal exercise strategies form the perspective of an ambiguity averse buyer. The multiple prior setting relaxes the presumption of a known distribution of the stock price process and captures the idea of incomplete information of the market data leading to model uncertainty. Using the theory of (reflected) backward stochastic differential equations we are able to solve the optimal stopping problem under multiple priors and identify the particular worst-case scenario in terms of the worst-case prior. By means of the analysis of exotic American options we highlight the main difference to classical single prior models. This is characterized by a resulting endogenous dynamic structure of the worst-case scenario generated by model adjustments of the agent due to particular occurring events that change the agent’s beliefs.

    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:
    File Function: First Version, 2011
    Download Restriction: no

    Paper provided by Center for Mathematical Economics, Bielefeld University in its series Center for Mathematical Economics Working Papers with number 448.

    in new window

    Length: 36
    Date of creation: 11 Feb 2016
    Handle: RePEc:bie:wpaper:448
    Contact details of provider: Postal:
    Postfach 10 01 31, 33501 Bielefeld

    Phone: +49(0)521-106-4907
    Web page:

    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

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

    When requesting a correction, please mention this item's handle: RePEc:bie:wpaper:448. 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: (Bettina Weingarten)

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.