callable russian options and their optimal boundaries可调用的俄罗斯选项及其最优边界.pdfVIP

Hindawi Publishing Corporation Journal of Applied Mathematics and Decision Sciences Volume 2009, Article ID 593986, 13 pages doi:10.1155/2009/593986 Research Article Callable Russian Options and Their Optimal Boundaries Atsuo Suzuki1 and Katsushige Sawaki2 1 Faculty of Urban Science, Meijo University, 4-3-3 Nijigaoka, Kani, Gifu 509-0261, Japan 2 Nanzan Business School, Nanzan University, 18 Yamazato-cho, Showa-ku, Nagoya 466-8673, Japan Correspondence should be addressed to Atsuo Suzuki, atsuo@urban.meijo-u.ac.jp Received 28 November 2008; Accepted 10 February 2009 Recommended by Lean Yu 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 the seller and the buyer, and is analyzed as Dynkin game. We derive the value function of callable Russian options and their optimal boundaries. Copyright q 2009 A. Suzuki and K. Sawaki. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. 1. Introduction For the last two decades there have been numerous papers see 1 on valuing American- style options with finite lived maturity. The valuation of such American-style options may often be able to be formulated as optimal stopping or free boundary problems which provide us partial differential equations with specific conditions. One of the difficult problems with pricing such options is finding a closed form solution of the option price. However, there are shortcuts that make it easy to calcula