The Uncertain Volatility Model and American Options

Claude Martini 1
1 MATHFI - Financial mathematics
Inria Paris-Rocquencourt, ENPC - École des Ponts ParisTech, UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12
Abstract : We study standard option prices in the one-dimensional Avellaneda-Lyons model with unknown volatility and no interest rate. We show that the price is that of an american option in the Black-Scholes model at the maximum volatility. Relying on the viscosity formulation of the problem and the qualitative property of the boundary between the regions of concavity and convexity of the solution we manage to design explicit solutions in some cases. The key idea is an embedding of the initial problem in a standard european one related to another payoff.
Type de document :
Rapport
[Research Report] RR-3697, INRIA. 1999
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https://hal.inria.fr/inria-00072972
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Soumis le : mercredi 24 mai 2006 - 11:29:40
Dernière modification le : vendredi 25 mai 2018 - 12:02:03
Document(s) archivé(s) le : jeudi 24 mars 2011 - 12:23:00

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Claude Martini. The Uncertain Volatility Model and American Options. [Research Report] RR-3697, INRIA. 1999. 〈inria-00072972〉

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