2005-02-10Buch DOI: 10.18452/3871
An Optimal Stopping Problem in a Diffusion-Type Model with Delay
Gapeev, Pavel V.
We present an explicit solution to an optimal stopping problem in a model described by a stochastic delay differential equation with an exponential delay measure. The method of proof is based on reducing the initial problem to a free-boundary problem and solving the latter by means of the smooth-fit condition. The problem can be interpreted as pricing special perpetual average American put options in a diffusion-type model with delay.
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Is Part Of Series: Sonderforschungsbereich 649: Ökonomisches Risiko - 5, SFB 649 Papers, ISSN:1860-5664