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Strict Local Martingale Deflators and Pricing American Call-Type Options

Authors
  • Bayraktar, Erhan
  • Kardaras, Constantinos
  • Xing, Hao
Type
Preprint
Publication Date
Dec 21, 2009
Submission Date
Aug 07, 2009
Source
arXiv
License
Yellow
External links

Abstract

We solve the problem of pricing and optimal exercise of American call-type options in markets which do not necessarily admit an equivalent local martingale measure. This resolves an open question proposed by Fernholz and Karatzas [Stochastic Portfolio Theory: A Survey, Handbook of Numerical Analysis, 15:89-168, 2009].

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