Perpetual American Options with Disconnected Exercise Regions in Lévy Models
23 Pages Posted: 29 Jul 2014
Date Written: July 28, 2014
For wide classes of payoff functions and Lévy processes, we solve perpetual restricted optimal stopping problems, when one exercise region is exogenously given (barrier like feature), and the other is chosen to optimize the option value, and straddle-like perpetual options, when the optimal exercise region is a union of two disjoint semi-infinite intervals.
Keywords: Lévy processes, perpetual American options with additional barrier, perpetual straddles and strangles, Wiener-Hopf factorization, EPV operators
JEL Classification: C61, G12
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