Paper Info
Title
Pricing of American Contingent Claims with Jump Stock Price and Constrained Portfolios
Abstract
In this paper, we study the problem of pricing American contingent claims in an incomplete market where the stock price process is supposed to be driven by both a Wiener process and a Poisson random measure and the portfolios are constrained. We formulate this problem as to find the minimal solution of a backward stochastic differential equation BSDE with constraints. We use the penalization method to construct a sequence of BSDEs with respect to Wiener process and Poisson random measure, and we show that the solutions of these equations converge to the minimal solution we are interested in. Finally, in the Markovian case, we characterize the minimal hedging price as the minimal viscosity supersolution of an integral-partial differential inequality with constraints.
Year
DOI
Venue
1998
10.1287/moor.23.1.177
Math. Oper. Res.
Keywords
DocType
Volume
constrained portfolios,american contingent claims,minimal viscosity supersolution,jump stock price,wiener process,stochastic differential equation,poisson random measure,integral-partial differential inequality,american contingent claim,minimal solution,markovian case,stock price process,minimal hedging price
Journal
23
Issue
ISSN
Citations 
1
0364-765X
0
PageRank 
References 
Authors
0.34
0
2
Name
Order
Citations
PageRank
Rainer Buckdahn16218.36
Ying Hu23012.40