Strict Local Martingale Deflators and Pricing American Call-Type Options

2009/08/07 by Erhan Bayraktar, Bayraktar, Erhan, Constantinos Kardaras +3
Economics, Econometrics and Finance · #Capital Investment and Risk Analysis #FOS: Economics and business #Financial Markets and Investment Strategies #Pricing of Securities (q-fin.PR) #Stochastic processes and financial applications #q-fin.PR

paper · pdf · doi:10.48550/arxiv.0908.1082

Key Words: Strict local martingales, deflators, American call options

openalex publication_date 2009/08/07 · arxiv created 2009/12/21 · arxiv updated 2010/01/07 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28

Abstract

We solve the problem of pricing 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 Fernholz and Karatzas [Stochastic Portfolio Theory: A Survey, Handbook of Numerical Analysis, 15:89-168, 2009].

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