Options on Multiple Assets in a Mean-Reverting Model

17 Pages Posted: 2 May 2010

See all articles by Masahiko Egami

Masahiko Egami

Kyoto University

Tadao Oryu

Kyoto University - Graduate School of Economics

Date Written: April 28, 2010

Abstract

We solve two optimal stopping problems whose payoff functions are the maximum and the minimum of two state variables driven by the Ornstein-Uhlenbeck processes. We consider a class of problems where we obtain analytical solutions. Furthermore, by making use of the analytical results we study some properties of exercise regions including convexity, symmetry, and continuity.

Keywords: options on multiple assets, optimal stopping, mean-reverting model, exercise boundaries

JEL Classification: C11, G13

Suggested Citation

Egami, Masahiko and Oryu, Tadao, Options on Multiple Assets in a Mean-Reverting Model (April 28, 2010). Available at SSRN: https://ssrn.com/abstract=1597639 or http://dx.doi.org/10.2139/ssrn.1597639

Masahiko Egami (Contact Author)

Kyoto University ( email )

Yoshida-Honmachi
Sakyo-ku
Kyoto, 606-8501
Japan

Tadao Oryu

Kyoto University - Graduate School of Economics ( email )

Japan

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