American perpetual options with random start
We consider the valuation of American perpetual options with the property that they are only possible to exercise after the occurrence of a random time, which is a stopping time with respect to a given filtration. One situation where this feature is present is when making an irreversible investment,...
| Main Author: | |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Elsevier
2019-10-01
|
| Series: | Results in Applied Mathematics |
| Online Access: | http://www.sciencedirect.com/science/article/pii/S2590037419300172 |
| id |
doaj-c6d60b5561174ca39f14e1e97aebb6b6 |
|---|---|
| record_format |
Article |
| spelling |
doaj-c6d60b5561174ca39f14e1e97aebb6b62020-11-25T01:25:24ZengElsevierResults in Applied Mathematics2590-03742019-10-013American perpetual options with random startFredrik Armerin0Department of Real Estate and Construction Management, KTH Royal Institute of Technology, SE-100 44, Stockholm, SwedenWe consider the valuation of American perpetual options with the property that they are only possible to exercise after the occurrence of a random time, which is a stopping time with respect to a given filtration. One situation where this feature is present is when making an irreversible investment, e.g. building on vacant land, while waiting for a permit to be allowed to do so. The random time in this case is the time at which the permit is given. This and the value of a version of an abandonment option are given as two applications of this modelling framework. Keywords: Optimal stopping, American options, Perpetual options, Real optionshttp://www.sciencedirect.com/science/article/pii/S2590037419300172 |
| collection |
DOAJ |
| language |
English |
| format |
Article |
| sources |
DOAJ |
| author |
Fredrik Armerin |
| spellingShingle |
Fredrik Armerin American perpetual options with random start Results in Applied Mathematics |
| author_facet |
Fredrik Armerin |
| author_sort |
Fredrik Armerin |
| title |
American perpetual options with random start |
| title_short |
American perpetual options with random start |
| title_full |
American perpetual options with random start |
| title_fullStr |
American perpetual options with random start |
| title_full_unstemmed |
American perpetual options with random start |
| title_sort |
american perpetual options with random start |
| publisher |
Elsevier |
| series |
Results in Applied Mathematics |
| issn |
2590-0374 |
| publishDate |
2019-10-01 |
| description |
We consider the valuation of American perpetual options with the property that they are only possible to exercise after the occurrence of a random time, which is a stopping time with respect to a given filtration. One situation where this feature is present is when making an irreversible investment, e.g. building on vacant land, while waiting for a permit to be allowed to do so. The random time in this case is the time at which the permit is given. This and the value of a version of an abandonment option are given as two applications of this modelling framework. Keywords: Optimal stopping, American options, Perpetual options, Real options |
| url |
http://www.sciencedirect.com/science/article/pii/S2590037419300172 |
| work_keys_str_mv |
AT fredrikarmerin americanperpetualoptionswithrandomstart |
| _version_ |
1725114129562206208 |