On the Perpetual American Put Options for Level Dependent Volatility Models with Jumps

Quantitative Finance, 11 (3), 335-341, 2011.

9 Pages Posted: 2 Feb 2014  

Erhan Bayraktar

University of Michigan at Ann Arbor - Department of Mathematics

Date Written: January 21, 2009

Abstract

We prove that the perpetual American put option price of level dependent volatility model with compound Poisson jumps is convex and is the classical solution of its associated quasi-variational inequality, that it is C2 except at the stopping boundary and that it is C1 everywhere (i.e. the smooth pasting condition always holds).

Keywords: American options, jump diffusion, smooth fit, perpetual

Suggested Citation

Bayraktar, Erhan, On the Perpetual American Put Options for Level Dependent Volatility Models with Jumps (January 21, 2009). Quantitative Finance, 11 (3), 335-341, 2011.. Available at SSRN: https://ssrn.com/abstract=2389432

Erhan Bayraktar (Contact Author)

University of Michigan at Ann Arbor - Department of Mathematics ( email )

2074 East Hall
530 Church Street
Ann Arbor, MI 48109-1043
United States

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