Viscosity Solutions and American Option Pricing in a Stochastic Volatility Model of the Ornstein-Uhlenbeck Type

Details Viscosity Solutions and American Option Pricing in a Stochastic Volatility Model of the Ornstein-Uhlenbeck Type Viscosity Solutions and American Option Pricing in a Stochastic Volatility Model of the Ornstein-Uhlenbeck Type

2008-12-12

arxiv.org/abs/0812.2444v1

Economy

Quantitative Finance

Computational Finance

Scientific paper

In this paper, we study the valuation of American type derivatives in the
stochastic volatility model of Barndorff-Nielsen and Shephard (2001). We
characterize the value of such derivatives as the unique viscosity solution of
an integral-partial differential equation when the payoff function satisfies a
Lipschitz condition.

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