Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
977986 | Physica A: Statistical Mechanics and its Applications | 2008 | 6 Pages |
Abstract
Continuous-time random walks are a well suited tool for the description of market behaviour at the smallest scale: the tick-to-tick evolution. We will apply this kind of market model to the valuation of perpetual American options: derivatives with no maturity that can be exercised at any time. Our approach leads to option prices that fulfill financial formulas when canonical assumptions on the dynamics governing the process are made, but it is still suitable for more exotic market conditions.
Related Topics
Physical Sciences and Engineering
Mathematics
Mathematical Physics
Authors
Miquel Montero,