Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
4634403 | Applied Mathematics and Computation | 2008 | 12 Pages |
Abstract
In this paper, we study the smoothness of the optimal exercise boundary (i.e. free boundary) of American-style arithmetic average Asian option with floating strike price in finite horizon case (i.e. parabolic case). Applying stochastic analysis the authors of [G. Peskir, N. Yus, On Asian options of American type, Exotic Option Pricing and Advanced Levy Models, Wiley, Eindhoven, 2004, pp. 217–235; G. Peskir, A. Shiryaev, Optimal stopping and free boundary problems, Lectures in Mathematics ETH Zurich, Birkhauser, 2006, pp. 416–436] proved that the optimal exercise boundary is a continuous and monotonic curve. Based on their results we prove that the optimal exercise boundary is infinitely differentiable using PDE method.
Related Topics
Physical Sciences and Engineering
Mathematics
Applied Mathematics
Authors
Fahuai Yi, Yingshan Chen,