Callable Russian Options and Their Optimal Boundaries英文文献资料.docVIP

HindawiPublishingCorporation JournalofAppliedMathematicsandDecisionSciences Volume2009,ArticleID593986,13pages doi:10.1155/2009/593986 ResearchArticle CallableRussianOptionsand TheirOptimalBoundaries AtsuoSuzuki andKatsushigeSawaki 1 2 1FacultyofUrbanScience,MeijoUniversity,4-3-3Nijigaoka, Kani,Gifu509-0261, Japan 2NanzanBusinessSchool,NanzanUniversity,18Yamazato-cho,Showa-ku, Nagoya466-8673, Japan Correspondence shouldbeaddressedtoAtsuoSuzuki,atsuo@urban.meijo-u.ac.jp Received28November 2008;Accepted 10February2009 Recommended byLeanYu We deal with the pricing of callable Russian options. A callable Russian option is a contract in which both of the seller and the buyer have the rights to cancel and to exercise at any time, respectively. The pricing of such an option can be formulated as an optimal stopping problem between theseller andthebuyer,andisanalyzed asDynkin game. Wederive thevalue function ofcallableRussianoptionsandtheiroptimalboundaries. Copyright q2009A.SuzukiandK.Sawaki. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction inanymedium,providedtheoriginalworkisproperlycited. 1.Introduction Forthelasttwodecadestherehavebeennumerouspaperssee1onvaluingAmerican- styleoptionswith?nitelivedmaturity.ThevaluationofsuchAmerican-styleoptionsmay oftenbeabletobeformulatedasoptimalstoppingorfreeboundaryproblemswhichprovide uspartialdi?erentialequationswithspeci?cconditions.Oneofthedi?cultproblemswith pricing such options is ?nding a closed form solution of the option price. However, there areshortcutsthatmakeiteasytocalculatetheclosedformsolutiontothatoptionsee2– 4.Perpetuitiescanprovideussuchashortcutbecausefreeboundariesofoptimalexercise policiesnolongerdependonthetime. Inthispaper,weconsiderthepricingofRussianoptionswithcallprovisionwherethe issuersellerhastherighttocallbacktheoptionaswellastheinvestorbuyerha