Perpetual American options within CTRW's

Details Perpetual American options within CTRW's Perpetual American options within CTRW's

2007-08-03

arxiv.org/abs/0708.0544v2

Physica A 387 (2008) 3936-3941

Economy

Quantitative Finance

Pricing of Securities

elsart, 12 pages, 2 figures, presented at APFA 6 conference; Revised and condensed version: 8 pages

Scientific paper

10.1016/j.physa.2008.01.054

Continuous-time random walks are a well suited tool for the description of market behaviour at the smallest scale: the tick-to-tick evolution. We will apply this kind of market model to the valuation of perpetual American options: derivatives with no maturity that can be exercised at any time. Our approach leads to option prices that fulfil financial formulas when canonical assumptions on the dynamics governing the process are made, but it is still suitable for more exotic market conditions.

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