Properties of American option prices

Erik Ekström

Stochastic Processes and their Applications, 2004, vol. 114, issue 2, 265-278

Abstract: We investigate some properties of American option prices in the setting of time- and level-dependent volatility. The properties under consideration are convexity in the underlying stock price, monotonicity and continuity in the volatility and time decay. Some properties are direct consequences of the corresponding properties of European option prices that are already known, and some follow by writing solutions of different stochastic differential equations as time changes of the same Brownian motion.

Keywords: Stochastic; time; change; Volatility; Optimal; stopping; Options (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (2)

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