General Duality for Perpetual American Options

Details General Duality for Perpetual American Options General Duality for Perpetual American Options

2006-12-21

arxiv.org/abs/math/0612649v1

Mathematics

Probability

Scientific paper

In this paper, we investigate the generalization of the Call-Put duality equality obtained in [1] for perpetual American options when the Call-Put payoff $(y-x)^+$ is replaced by $\phi(x,y)$. It turns out that the duality still holds under monotonicity and concavity assumptions on $\phi$. The specific analytical form of the Call-Put payoff only makes calculations easier but is not crucial unlike in the derivation of the Call-Put duality equality for European options. Last, we give some examples for which the optimal strategy is known explicitly.

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