Gapeev, Pavel V. 
ORCID: 0000-0002-1346-2074 and Lerche, Hans Rudolf
(2009)
Discounted optimal stopping for diffusions: free-boundary versus martingale approach.
CDAM research report (LSE-CDAM-2009-03).
CDAM@LSE, London, UK.
Abstract
The free-boundary and the martingale approach are competitive methods of solving discounted optimal stopping problems for one-dimensional time-homogeneous regular diffusion processes on infinite time intervals. We provide a missing link showing the equivalence of these approaches for a problem, where the optimal stopping time is equal to the rst exit time of the underlying process from a region restricted by two constant boundaries. We also consider several illustrating examples including the rational valuation of the perpetual American strangle option.
| Item Type: | Monograph (Report) |
|---|---|
| Official URL: | http://www.cdam.lse.ac.uk/Reports/reports2009.html |
| Additional Information: | © 2009 The authors |
| Divisions: | Mathematics |
| Subjects: | H Social Sciences > HA Statistics |
| Date Deposited: | 31 Mar 2010 13:52 |
| Last Modified: | 12 Dec 2024 05:48 |
| URI: | http://eprints.lse.ac.uk/id/eprint/27622 |
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