2006-09-11Buch DOI: 10.18452/3988
Perpetual Barrier Options in Jump-Diffusion Models
Gapeev, Pavel V.
We present a closed form solution to the perpetual American double barrier call option problem in a model driven by a Brownian motion and a compound Poisson process with exponential jumps. The method of proof is based on reducing the initial 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.
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Is Part Of Series: Sonderforschungsbereich 649: Ökonomisches Risiko - 58, SFB 649 Papers, ISSN:1860-5664