Variational Formulation of American Option Prices in the Heston Model

DOI10.1137/17M1158872zbMath1422.91711arXiv1711.11311WikidataQ128172161 ScholiaQ128172161MaRDI QIDQ5227407

Damien Lamberton, Giulia Terenzi

Publication date: 26 July 2019

Published in: SIAM Journal on Financial Mathematics (Search for Journal in Brave)

Full work available at URL: https://arxiv.org/abs/1711.11311

zbMATH Keywords

American optionsoptimal stopping problemdegenerate parabolic obstacle problem

Mathematics Subject Classification ID

Stochastic models in economics (91B70) Complementarity and equilibrium problems and variational inequalities (finite dimensions) (aspects of mathematical programming) (90C33) Stopping times; optimal stopping problems; gambling theory (60G40) Derivative securities (option pricing, hedging, etc.) (91G20)

Related Items (3)

Analysis of VIX-linked fee incentives in variable annuities via continuous-time Markov chain approximation ⋮ On the Continuity of Optimal Stopping Surfaces for Jump-Diffusions ⋮ A two-dimensional control problem arising from dynamic contracting theory

Cites Work

• Variational inequalities and the pricing of American options
• \(C^{1,1}\) regularity for degenerate elliptic obstacle problems
• The Black-Scholes equation in stochastic volatility models
• Degenerate-elliptic operators in mathematical finance and higher-order regularity for solutions to variational equations
• Affine diffusions and related processes: simulation, theory and applications
• MOMENT EXPLOSIONS AND LONG-TERM BEHAVIOR OF AFFINE STOCHASTIC VOLATILITY MODELS
• A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options
• Stochastic representation of solutions to degenerate elliptic and parabolic boundary value and obstacle problems with Dirichlet boundary conditions
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