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The integral option in a model with jumps

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We present a closed form solution to be considered in Kramkov and Mordecki [Kramkov, D.O., Mordecki, E., 1994. Integral option. Theory of Probability and its Applications 39 (1), 201–211] optimal stopping problem for the case of geometric compound Poisson process with exponential jumps. The method of proof is based on reducing the initial problem to an integro-differential free-boundary problem and solving the latter by using continuous and smooth fit. The result can be interpreted as pricing perpetual integral options in a model with jumps.

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en

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http://eprints.lse.ac.uk/21942/

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