Recovering a time-homogeneous stock price process from perpetual option prices

DOI10.1214/10-AAP720zbMath1228.91068arXiv0903.4833OpenAlexW3100239091MaRDI QIDQ549870

Erik Ekström, David G. Hobson

Publication date: 19 July 2011

Published in: The Annals of Applied Probability (Search for Journal in Brave)

Full work available at URL: https://arxiv.org/abs/0903.4833

zbMATH Keywords

inverse problemsAmerican optionsexact calibration of volatilitygeneralized diffusions

Mathematics Subject Classification ID

Stopping times; optimal stopping problems; gambling theory (60G40) Diffusion processes (60J60) Derivative securities (option pricing, hedging, etc.) (91G20)

Related Items

Feynman–Kac theorems for generalized diffusions, Monotonicity of implied volatility for perpetual put options, Can time-homogeneous diffusions produce any distribution?, Perpetual American options in a diffusion model with piecewise-linear coefficients, Parameter Dependent Optimal Thresholds, Indifference Levels and Inverse Optimal Stopping Problems, Recovering a Piecewise Constant Volatility from Perpetual Put Option Prices, MODEL-INDEPENDENT NO-ARBITRAGE CONDITIONS ON AMERICAN PUT OPTIONS, Constructing time-homogeneous generalized diffusions consistent with optimal stopping values

Cites Work

• Making Markov martingales meet marginals: With explicit constructions
• Exact volatility calibration based on a Dupire-type call-put duality for perpetual American options
• Sticky Brownian motion as the strong limit of a sequence of random walks
• Processes that can be embedded in Brownian motion
• Robust hedging of the lookback option
• Arbitrage-free market models for option prices: the multi-strike case
• Bond Pricing and the Term Structure of Interest Rates: A New Methodology for Contingent Claims Valuation
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