Abstract
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.
Citation
Erik Ekström. David Hobson. "Recovering a time-homogeneous stock price process from perpetual option prices." Ann. Appl. Probab. 21 (3) 1102 - 1135, June 2011. https://doi.org/10.1214/10-AAP720
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