Applications of weak convergence for hedging of game options

Yan Dolinsky

Papers from arXiv.org

Abstract: In this paper we consider Dynkin's games with payoffs which are functions of an underlying process. Assuming extended weak convergence of underlying processes $\{S^{(n)}\}_{n=0}^{\infty}$ to a limit process $S$ we prove convergence Dynkin's games values corresponding to $\{S^{(n)}\}_{n=0}^{\infty}$ to the Dynkin's game value corresponding to $S$. We use these results to approximate game options prices with path dependent payoffs in continuous time models by a sequence of game options prices in discrete time models which can be calculated by dynamical programming algorithms. In comparison to previous papers we work under more general convergence of underlying processes, as well as weaker conditions on the payoffs.

Date: 2009-08, Revised 2010-11
New Economics Papers: this item is included in nep-gth and nep-hpe
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Published in Annals of Applied Probability 2010, Vol. 20, No. 5, 1891-1906

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:0908.3661

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