THE VALUATION OF RUSSIAN OPTIONS FOR DOUBLE EXPONENTIAL JUMP DIFFUSION PROCESSES

Atsuo Suzuki () and Katsushige Sawaki ()
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Atsuo Suzuki: Faculty of Urban Science, Meijo University, Kani-shi, 509-0261, Japan
Katsushige Sawaki: Nanzan Business School, Nagoya-Shi, 466-8673, Japan

Asia-Pacific Journal of Operational Research (APJOR), 2010, vol. 27, issue 02, 227-242

Abstract: In this paper, we derive closed form solution for Russian option with jumps. First, we discuss the pricing of Russian options when the stock pays dividends continuously. Secondly, we derive the value function of Russian options by solving the ordinary differential equation with some conditions (the value function is continuous and differentiable at the optimal boundary for the buyer). And we investigate properties of optimal boundaries of the buyer. Finally, some numerical results are presented to demonstrate analytical properties of the value function.

Keywords: Russian option; jump diffusion process (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (1)

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DOI: 10.1142/S021759591000265X

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