Options on Multiple Assets in a Mean-Reverting Model
17 Pages Posted: 2 May 2010
Date Written: April 28, 2010
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
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