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Bounds for perpetual American option prices in a jump diffusion model

Part of: Stochastic processes

Published online by Cambridge University Press:  14 July 2016

Erik Ekström
Erik Ekström*
Affiliation:
University of Manchester
*
∗Postal address: School of Mathematics, University of Manchester, Sackville Street, Manchester M60 1QD, UK. Email address: ekstrom@maths.manchester.ac.uk
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Abstract

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We provide bounds for perpetual American option prices in a jump diffusion model in terms of American option prices in the standard Black–Scholes model. We also investigate the dependence of the bounds on different parameters of the model.

Keywords

American optionboundjump diffusionoptimal stopping

MSC classification

Secondary: 60G40: Stopping times; optimal stopping problems; gambling theory
Type
Research Article
Information
Journal of Applied Probability , Volume 43 , Issue 3 , September 2006 , pp. 867 - 873
Copyright
© Applied Probability Trust 2006 

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