Volatility and dividend risk in perpetual American options
| dc.creator | Montero, Miquel | |
| dc.date | 2006-10-09 | |
| dc.date | 2007-03-05 | |
| dc.date.accessioned | 2026-07-07T12:07:53Z | |
| dc.date.available | 2026-07-07T12:07:53Z | |
| dc.description | American options are financial instruments that can be exercised at any time before expiration. In this paper we study the problem of pricing this kind of derivatives within a framework in which some of the properties --volatility and dividend policy-- of the underlaying stock can change at a random instant of time, but in such a way that we can forecast their final values. Under this assumption we can model actual market conditions because some of the most relevant facts that may potentially affect a firm will entail sharp predictable effects. We will analyse the consequences of this potential risk on perpetual American derivatives, a topic connected with a wide class of recurrent problems in physics: holders of American options must look for the fair price and the optimal exercise strategy at once, a typical question of free absorbing boundaries. We present explicit solutions to the most common contract specifications and derive analytical expressions concerning the mean and higher moments of the exercise time. | |
| dc.description | 21 pages, 5 figures, iopart, submitted for publication; deep revision, two new appendices | |
| dc.identifier | https://arxiv.org/abs/physics/0610047 | |
| dc.identifier | http://arxiv.org/abs/physics/0610047 | |
| dc.identifier | J. Stat. Mech. (2007) P04002 | |
| dc.identifier | doi:10.1088/1742-5468/2007/04/P04002 | |
| dc.identifier.uri | http://salesiana.dossiersoluciones.com/handle/123456789/209128 | |
| dc.subject | Physics and Society | |
| dc.subject | Pricing of Securities | |
| dc.subject | Risk Management | |
| dc.subject | Statistical Finance | |
| dc.title | Volatility and dividend risk in perpetual American options | |
| dc.type | text |