Martingales and upper bounds for American-style options

Yang Wang, Russel Caflisch

Research output: Contribution to journalArticle

Abstract

This article presents an analytical representation of the 'optimal' Martingale that appears in the dual pricing formula for an American-style option, in a generic continuous setting. This representation has a hedging interpretation and could provide an approach for computing an upper bound on the price of an American-style option.

Original languageEnglish (US)
Pages (from-to)695-705
Number of pages11
JournalCommunications in Mathematical Sciences
Volume13
Issue number3
DOIs
StatePublished - Jan 1 2015

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Keywords

  • American option
  • Dual pricing formula
  • Martingale
  • Upper bound estimation

ASJC Scopus subject areas

  • Mathematics(all)
  • Applied Mathematics

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