Journal Articles SIAM Journal on Financial Mathematics Year : 2019

Variational formulation of American option prices in the Heston Model

Abstract

We give an analytical characterization of the price function of an American option in Heston-type models. Our approach is based on variational inequalities and extends recent results of Daskalopoulos and Feehan (2011). We study the existence and uniqueness of a weak solution of the associated degenerate parabolic obstacle problem. Then, we use suitable estimates on the joint distribution of the log-price process and the volatility process in order to characterize the analytical weak solution as the solution to the optimal stopping problem. We also rely on semi-group techniques and on the affine property of the model.
Fichier principal
Vignette du fichier
paperlastversion.pdf (477.97 Ko) Télécharger le fichier
Origin Files produced by the author(s)
Loading...

Dates and versions

hal-01649496 , version 1 (30-11-2017)
hal-01649496 , version 2 (10-12-2018)

Identifiers

Cite

Damien Lamberton, Giulia Terenzi. Variational formulation of American option prices in the Heston Model. SIAM Journal on Financial Mathematics, 2019, 10 (1), pp.261-368. ⟨10.1137/17M1158872⟩. ⟨hal-01649496v2⟩
320 View
1019 Download

Altmetric

Share

More