THE PRICING OF PERPETUAL GAME PUT OPTIONS AND OPTIMAL BOUNDARIES

Atsuo Suzuki and Katsushige Sawaki
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Atsuo Suzuki: Nanzan University, 27 Seirei-cho, Aichi, Japan
Katsushige Sawaki: Nanzan University, 27 Seirei-cho, Aichi, Japan

Chapter 12 in Recent Advances in Stochastic Operations Research, 2007, pp 175-187 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractIn this paper we deal with the pricing model of game options introduced by Kifer which is a contract in that the seller and the buyer have both the rights to cancel and to exercise it at any time, respectively. First, we discuss the pricing of perpetual game put options by applying the first hitting time approach of a Brownian motion, when the stock pays dividends continuously. Secondly, we investigate properties of optimal boundaries of the seller and the buyer. Finally, some numerical results are presented to demonstrate analytical properties of the value function.

Keywords: Operations Research; Uncertainty; Applied Probability; Stochastic Process; Optimization; Decision Science (search for similar items in EconPapers)
Date: 2007
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