17 Pages Posted: 28 May 2016
Date Written: July 2, 2010
We solve the problem of valuing and optimal exercise of American call-type options in markets which do not necessarily admit an equivalent local martingale measure. This resolves an open question proposed by Karatzas and Fernholz (Handbook of Numerical Analysis, vol. 15, pp. 89–167, Elsevier, Amsterdam, 2009).
Keywords: Strict local martingales, Deflators, American call options
JEL Classification: G13, C60
Suggested Citation: Suggested Citation
Bayraktar, Erhan and Kardaras, Constantinos and Xing, Hao, Strict Local Martingale Deflators and Valuing American Call-Type Options (July 2, 2010). Finance Stochastics, Vol. 16, No. 2, 2012. Available at SSRN: https://ssrn.com/abstract=2785667