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Recovering a time-homogeneous stock price process from perpetual option prices
Uppsala University, Disciplinary Domain of Science and Technology, Mathematics and Computer Science, Department of Mathematics, Analysis and Applied Mathematics.
2011 (English)In: The Annals of Applied Probability, ISSN 1050-5164, Vol. 21, no 3, 1102-1135 p.Article in journal (Refereed) Published
Abstract [en]

It is well known how to determine the price of perpetual American options if the underlying stock price is a time-homogeneous diffusion. In the present paper we consider the inverse problem, that is, given prices of perpetual American options for different strikes, we show how to construct a time-homogeneous stock price model which reproduces the given option prices.

Place, publisher, year, edition, pages
2011. Vol. 21, no 3, 1102-1135 p.
Keyword [en]
American options, generalized diffusions, exact calibration of volatility, inverse problems
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URN: urn:nbn:se:uu:diva-156011DOI: 10.1214/10-AAP720ISI: 000291736600010OAI: oai:DiVA.org:uu-156011DiVA: diva2:429783
Available from: 2011-07-05 Created: 2011-07-05 Last updated: 2016-05-02Bibliographically approved

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Ekström, Erik
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