American options in nonlinear markets

Edward Kim; Tianyang Nie; Marek Rutkowski

doi:10.1214/21-EJP658

American options in nonlinear markets

Edward Kim, Tianyang Nie^*, Marek Rutkowski

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

4 Citations (Scopus)

Abstract

We study unilateral valuation problems for American options within the framework of a general nonlinear market by extending results from Bielecki et al. [9, 12] who examined contracts of European style. A BSDE approach is used to establish more explicit pricing, hedging and exercising results when solutions to reflected BSDEs have additional desirable properties. We employ for this purpose results on solutions to BSDEs and reflected BSDEs driven by RCLL martingales obtained by Nie and Rutkowski [62, 63].

Original language	English
Article number	90
Pages (from-to)	1-41
Number of pages	26
Journal	Electronic Journal of Probability
Volume	26
DOIs	https://doi.org/10.1214/21-EJP658
Publication status	Published - 2021
Externally published	Yes

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10.1214/21-EJP658

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title = "American options in nonlinear markets",

abstract = "We study unilateral valuation problems for American options within the framework of a general nonlinear market by extending results from Bielecki et al. [9, 12] who examined contracts of European style. A BSDE approach is used to establish more explicit pricing, hedging and exercising results when solutions to reflected BSDEs have additional desirable properties. We employ for this purpose results on solutions to BSDEs and reflected BSDEs driven by RCLL martingales obtained by Nie and Rutkowski [62, 63].",

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AB - We study unilateral valuation problems for American options within the framework of a general nonlinear market by extending results from Bielecki et al. [9, 12] who examined contracts of European style. A BSDE approach is used to establish more explicit pricing, hedging and exercising results when solutions to reflected BSDEs have additional desirable properties. We employ for this purpose results on solutions to BSDEs and reflected BSDEs driven by RCLL martingales obtained by Nie and Rutkowski [62, 63].

KW - American option

KW - Nonlinear evaluation

KW - Nonlinear market

KW - Reflected BSDE

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JO - Electronic Journal of Probability

JF - Electronic Journal of Probability

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ER -

American options in nonlinear markets

Abstract

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