Publicação
Pricing perpetual put options by the Black-Scholes equation with a nonlinear volatility function
| dc.contributor.author | Grossinho, Maria do Rosário | |
| dc.contributor.author | Kord, Yaser Faghan | |
| dc.contributor.author | Ševčovič, Daniel | |
| dc.date.accessioned | 2018-11-14T14:26:40Z | |
| dc.date.available | 2018-11-14T14:26:40Z | |
| dc.date.issued | 2017-12 | |
| dc.description.abstract | We investigate qualitative and quantitative behavior of a solution to the problem of pricing American style of perpetual put options. We assume the option price is a solution to a stationary generalized Black-Scholes equation in which the volatility may depend on the second derivative of the option price itself. We prove existence and uniqueness of a solution to the free boundary problem. We derive a single implicit equation for the free boundary position and the closed form formula for the option price. It is a generalization of the well-known explicit closed form solution derived by Merton for the case of a constant volatility. We also present results of numerical computations of the free boundary position, option price and their dependence on model parameters. | pt_PT |
| dc.description.version | info:eu-repo/semantics/publishedVersion | pt_PT |
| dc.identifier.citation | Grossinho, Maria do Rosário, Yaser Faghan Kord e Daniel Ševčovič (2017). "Pricing perpetual put options by the Black-Scholes equation with a nonlinear volatility function". Instituto Superior de Economia e Gestão – REM Working paper nº 019 - 2017 | pt_PT |
| dc.identifier.issn | 2184-108X | |
| dc.identifier.uri | http://hdl.handle.net/10400.5/16343 | |
| dc.language.iso | eng | pt_PT |
| dc.peerreviewed | yes | pt_PT |
| dc.publisher | ISEG - REM - Research in Economics and Mathematics | pt_PT |
| dc.relation.ispartofseries | REM Working paper;nº 019 - 2017 | |
| dc.relation.publisherversion | https://rem.rc.iseg.ulisboa.pt/wps/pdf/REM_WP_019_2017.pdf | pt_PT |
| dc.subject | Option pricing | pt_PT |
| dc.subject | nonlinear Black-Scholes equation | pt_PT |
| dc.subject | perpetual American put option | pt_PT |
| dc.subject | early exercise boundary | pt_PT |
| dc.title | Pricing perpetual put options by the Black-Scholes equation with a nonlinear volatility function | pt_PT |
| dc.type | working paper | |
| dspace.entity.type | Publication | |
| rcaap.rights | openAccess | pt_PT |
| rcaap.type | workingPaper | pt_PT |