Perpetual Put-Like and Call-Like American Options Under Levy Processes, and Incremental Capital Expansion

17 Pages Posted: 6 Mar 2004

See all articles by Svetlana Boyarchenko

Svetlana Boyarchenko

University of Texas at Austin - Department of Economics

Sergei Levendorskii

Calico Science Consulting

Date Written: February 27, 2004

Abstract

For wide classes of put-like and call-like perpetual options under Levy processes satisfying the (ACP)-property, the optimal exercise price and rational option price are found. The results are formulated in terms of resolvent operators of the supremum and infimum processes, which are natural generalization of resolvent operators in the Markovian case, and a short proof of optimality based on properties of these resolvents is given. As an application, the problem of incremental capital expansion is solved.

Keywords: Levy processes, optimal stopping, general payoffs

JEL Classification: C61, D81, G12, G31

Suggested Citation

Boyarchenko, Svetlana I. and Levendorskii, Sergei Z., Perpetual Put-Like and Call-Like American Options Under Levy Processes, and Incremental Capital Expansion (February 27, 2004). Available at SSRN: https://ssrn.com/abstract=510423 or http://dx.doi.org/10.2139/ssrn.510423

Svetlana I. Boyarchenko

University of Texas at Austin - Department of Economics ( email )

Austin, TX 78712
United States

Sergei Z. Levendorskii (Contact Author)

Calico Science Consulting ( email )

Austin, TX
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
194
Abstract Views
1,599
rank
164,202
PlumX Metrics