Mathematics – Probability
Scientific paper
2009-03-27
Mathematics
Probability
Scientific paper
It is well-known how to determine the price of perpetual American options if
the underlying stock price is a time-homogeneous diffusion. In the present
paper we consider the inverse problem, i.e. given prices of perpetual American
options for different strikes we show how to construct a time-homogeneous model
for the stock price which reproduces the given option prices.
Ekstrom Erik
Hobson David
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