Resource title

Perpetual barrier options in jump-diffusion models

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Resource description

We present a closed form solution to the perpetual American double barrier call option problem in a model driven by Brownian motion and a compound Poisson process with exponential jumps. The method of proof is based on reducing the inital irregular optimal stopping problem to an integro-differential free-boundary problem and solving the latter by using continuous and smooth fit. The obtained solution of the nontrivial free-boundary problem gives the possibility to observe some special analytic properties of the value function at the optimal stopping boundaries.

Resource author

Pavel V. Gapeev

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/25141

Resource license

Adapt according to the presented license agreement and reference the original author.