Strict Local Martingale Deflators and Valuing American Call-Type Options
17 Pages Posted: 28 May 2016
Date Written: July 2, 2010
Abstract
We solve the problem of valuing and optimal exercise of American call-type options in markets which do not necessarily admit an equivalent local martingale measure. This resolves an open question proposed by Karatzas and Fernholz (Handbook of Numerical Analysis, vol. 15, pp. 89–167, Elsevier, Amsterdam, 2009).
Keywords: Strict local martingales, Deflators, American call options
JEL Classification: G13, C60
Suggested Citation: Suggested Citation
Bayraktar, Erhan and Kardaras, Constantinos and Xing, Hao, Strict Local Martingale Deflators and Valuing American Call-Type Options (July 2, 2010). Finance Stochastics, Vol. 16, No. 2, 2012, Available at SSRN: https://ssrn.com/abstract=2785667
Do you have negative results from your research you’d like to share?
Feedback
Feedback to SSRN
If you need immediate assistance, call 877-SSRNHelp (877 777 6435) in the United States, or +1 212 448 2500 outside of the United States, 8:30AM to 6:00PM U.S. Eastern, Monday - Friday.