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Convergence and Approximation of Option Rewards for Multivariate Price Processes
Mälardalen University, School of Education, Culture and Communication. (Avdelningen för tillämpad matematik)
Mälardalen University, School of Education, Culture and Communication. (Avdelningen för tillämpad matematik)ORCID iD: 0000-0002-2626-5598
2009 (English)Report (Other (popular science, discussion, etc.))
Abstract [en]

Multivariate Markov price processes and American type options for such processes with generalpayoff functions with not more than polynomial rate of growth are considered. Convergence results are obtainedfor optimal reward functionals of American type options for perturbed multivariateMarkov processes and payoff functions. These results are applied to approximation tree type algorithmsfor American type options for exponential diffusion type priceprocesses including mean-reverse stochastic processesused to model stochastic dynamics of energy prices.

Place, publisher, year, edition, pages
2009. , p. 46
Series
Research Reports MDH/UKK, ISSN 1404-4978 ; 2009-1
Keywords [en]
American option, Reward, Convergence, Binomial-Trinomial Tree Approximation, Optimal Stopping, Skeleton Approximation, Multivariate Markov Price Process
National Category
Probability Theory and Statistics
Research subject
Mathematics/Applied Mathematics
Identifiers
URN: urn:nbn:se:mdh:diva-5636OAI: oai:DiVA.org:mdh-5636DiVA, id: diva2:209030
Available from: 2009-03-23 Created: 2009-03-23 Last updated: 2015-01-30Bibliographically approved
In thesis
1. Optimal Stopping and Convergence of Option Rewards
Open this publication in new window or tab >>Optimal Stopping and Convergence of Option Rewards
2009 (English)Licentiate thesis, comprehensive summary (Other academic)
Abstract [en]

This thesis is based on two articles devoted to optimal stopping problems of American type options.

In article A, we study the problem of optimal reselling for European options. The problem can be transformed to the problem of exercising an American option with two underlying. An approximate binomial-trinomial tree algorithm for the reselling model is constructed.

In article B, we get general convergence results for the American option rewards for multivariate Markov price processes. These results are used to prove convergence of tree approximations presented in papers A and B.

Publisher
p. 150
Series
Mälardalen University Press Licentiate Theses, ISSN 1651-9256 ; 101
Identifiers
urn:nbn:se:mdh:diva-5637 (URN)978-91-86135-21-8 (ISBN)
Presentation
2009-04-23, Gamma, Högskoleplan 1, hus U, Västerås, 13:15 (English)
Opponent
Supervisors
Available from: 2009-03-24 Created: 2009-03-23 Last updated: 2015-01-30Bibliographically approved

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Silvestrov, Dmitrii

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Language
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