Analysis of the optimal exercise boundary of American options for jump diffusions

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dc.creatorBayraktar, Erhan
dc.creatorXing, Hao
dc.date2007-12-20
dc.date2008-11-26
dc.date.accessioned2026-07-07T12:04:57Z
dc.date.available2026-07-07T12:04:57Z
dc.descriptionIn this paper we show that the optimal exercise boundary / free boundary of the American put option pricing problem for jump diffusions is continuously differentiable (except at the maturity). This differentiability result has been established by Yang et al. (European Journal of Applied Mathematics, 17(1):95-127, 2006) in the case where the condition $r\geq q+ λ\int_{\R_+} (e^z-1) ν(dz)$ is satisfied. We extend the result to the case where the condition fails using a unified approach that treats both cases simultaneously. We also show that the boundary is infinitely differentiable under a regularity assumption on the jump distribution.
dc.descriptionKey Words: American put option, jump diffusions, smoothness of the early exercise boundary, integro-differential equations, parabolic differential equations
dc.identifierhttps://arxiv.org/abs/0712.3323
dc.identifierhttp://arxiv.org/abs/0712.3323
dc.identifier.urihttp://salesiana.dossiersoluciones.com/handle/123456789/208253
dc.subjectProbability
dc.subjectAnalysis of PDEs
dc.titleAnalysis of the optimal exercise boundary of American options for jump diffusions
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