Mathematical and Statistical Models and Methods in Reliability

Part of the series Statistics for Industry and Technology pp 371-389


Optimal Stopping and Reselling of European Options

  • Robin LundgrenAffiliated withMälardalen University Email author 
  • , Dmitrii S. SilvestrovAffiliated withStockholm University

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We consider the problem of optimal reselling of European options. A bivariate exponential diffusion process is used to describe the reselling model. In this way, the reselling problem is imbedded to the model of finding optimal reward for American type option based on this process. Convergence results are formulated for optimal reward functionals of American type options for perturbed multi-variate Markov processes. An approximation bivariate tree model is constructed and convergence of optimal expected reward for this tree model to the optimal expected reward for the corresponding reselling model is proved.

Keywords and phrases

American option Binomial–trinomial approximation Convergence European option Optimal stopping Reselling problem