2019/04/24 by Laurent Miclo, Stéphane Villeneuve, Miclo, Laurent +1
Business, Management and Accounting · Economics, Econometrics and Finance · #Advanced Queuing Theory Analysis #Capital Investment and Risk Analysis #FOS: Mathematics #Probability (math.PR) #Stochastic processes and financial applications
paper · pdf · doi:10.48550/arxiv.1904.10685
openalex publication_date 2019/04/24 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
This paper is concerned with the solution of the optimal stopping problem associated to the valuation of Perpetual American options driven by continuous time Markov chains. We introduce a new dynamic approach for the numerical pricing of this type of American options where the main idea is to build a monotone sequence of almost excessive functions that are associated to hitting times of explicit sets. Under minimal assumptions about the payoff and the Markov chain, we prove that the value function of an American option is characterized by the limit of this monotone sequence.