Viscosity Solutions and American Option Pricing in a Stochastic Volatility Model of the Ornstein-Uhlenbeck Type

Viscosity Solutions and American Option Pricing in a Stochastic Volatility Model of the Ornstein-Uhlenbeck Type

We study the valuation of American-type derivatives in the stochastic volatility model of Barndorff-Nielsen and Shephard (2001). We characterize the value of such derivatives as the unique viscosity solution of an integral-partial differential equation when the payoff function satisfies a Lipschitz...

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Veröffentlicht in:Journal of Probability and Statistics 2010-01, Vol.2010 (1), p.654-671
1. Verfasser: Roch, Alexandre F.
Format: Artikel
Sprache:eng
Schlagworte:
Derivatives
Differential equations
Economic models
Lipschitz condition
Mathematical models
Pricing
Statistics
Stochasticity
Studies
Viscosity
Volatility
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Zusammenfassung:We study the valuation of American-type derivatives in the stochastic volatility model of Barndorff-Nielsen and Shephard (2001). We characterize the value of such derivatives as the unique viscosity solution of an integral-partial differential equation when the payoff function satisfies a Lipschitz condition.
ISSN:1687-952X
1687-9538
DOI:10.1155/2010/863585