Properties of game options

Erik Ekström ()

Mathematical Methods of Operations Research, 2006, vol. 63, issue 2, 238 pages

Abstract: A game option is an American option with the added feature that not only the option holder, but also the option writer, can exercise the option at any time. We characterize the value of a perpetual game option in terms of excessive functions, and we use the connection between excessive functions and concave functions to explicitly determine the value in some examples. Moreover, a condition on the two contract functions is provided under which the value is convex in the underlying diffusion value in the continuation region and increasing in the diffusion coefficient. Copyright Springer-Verlag 2006

Keywords: Optimal stopping games; Game options; Excessive functions; Volatility; Price orderings (search for similar items in EconPapers)
Date: 2006
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DOI: 10.1007/s00186-005-0027-3

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