Some calculations for Israeli options

Andreas Kyprianou ()

Finance and Stochastics, 2004, vol. 8, issue 1, 73-86

Abstract: Recently Kifer (2000) introduced the concept of an Israeli (or Game) option. That is a general American-type option with the added possibility that the writer may terminate the contract early inducing a payment exceeding the holder’s claim had they exercised at that moment. Kifer shows that pricing and hedging of these options reduces to evaluating a saddle point problem associated with Dynkin games. In this short text we give two examples of perpetual Israeli options where the solutions are explicit. Copyright Springer-Verlag Berlin/Heidelberg 2004

Keywords: Stochastic games; option pricing; fluctuation theory; American options; Russian options; Israeli options (search for similar items in EconPapers)
Date: 2004
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DOI: 10.1007/s00780-003-0104-5

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