The Randomized American Option as a Classical Solution to the Penalized Problem

We connect the exercisability randomized American option to the penalty method by showing that the randomized American option value u is the unique classical solution to the Cauchy problem corresponding to the canonical penalty problem for American options. We also establish a uniform bound for Au,...

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Bibliographic Details
Published inJournal of function spaces Vol. 2015; no. 2015; pp. 1 - 5
Main Author Leduc, Guillaume
Format Journal Article
LanguageEnglish
Published Cairo, Egypt Hindawi Publishing Corporation 01.01.2015
Hindawi Limited
Subjects
Brownian motion
Cauchy problem
Function space
Generators
Options trading
Partial differential equations
Stock options
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Summary:We connect the exercisability randomized American option to the penalty method by showing that the randomized American option value u is the unique classical solution to the Cauchy problem corresponding to the canonical penalty problem for American options. We also establish a uniform bound for Au, where A is the infinitesimal generator of a geometric Brownian motion.
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ISSN:2314-8896
2314-8888
DOI:10.1155/2015/245436