Structure of Optimal Stopping Strategies for American Type Options
The general pricing processes represented by an inhomogeneous vector Markov process with discrete time is considered. Its first component is interpreted as a price process and the second one as an index process controlling the price component. American type options with convex pay-off functions are studied. The structure optimal and ε-optimal buyer stopping strategies is investigated for various classes of convex pay-off functions.
Key words and phrasesMarkov process optimal stopping convex pay-off function American options
AMS 1991 subject classificationPrimary 62P05 90C40 Secondary 60J25 60J20
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