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Structure of Optimal Stopping Domains for American Options with Knock out Domains
Mälardalen University, Department of Mathematics and Physics.
2007 (Swedish)In: Theory of Stochastic Processes, ISSN 0321-3900, Vol. 13(29), no 4, p. 98-129Article in journal (Refereed) Published
Abstract [en]

American options give us the possibility to exercise them at any moment of time up to maturity. An optimal stopping domain for American type options is a domain that, if the underlying price process enters we should exercise the option. A knock out option is a American barrier option of knock out type, but with more general shape structure of the knock out domain. An algorithm for generating the optimal stopping domain for American type knock out options is constructed. Monte Carlo simulation is used to determine the structure of the optimal stopping domain. Results of the structural, and stability of studies are presented for different models of payoff functions and knock out domains.

Place, publisher, year, edition, pages
2007. Vol. 13(29), no 4, p. 98-129
Keywords [en]
Markov processes, optimal stopping, discrete time, American option, barrier option, knock out option, Monte Carlo simulation
National Category
Probability Theory and Statistics
Identifiers
URN: urn:nbn:se:mdh:diva-3091OAI: oai:DiVA.org:mdh-3091DiVA, id: diva2:115755
Available from: 2008-03-31 Created: 2008-03-31 Last updated: 2017-02-15Bibliographically approved

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http://tsp.imath.kiev.ua/files/26/2007_13_4_7.pdf

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CiteExportLink to record
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