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Strict local martingale deflators and valuing American call-type options

By Erhan Bayraktar, Constantinos Kardaras and Hao Xing

Abstract

We solve the problem of valuing and optimal exercise of American calltype options in markets which do not necessarily admit an equivalent local martingale measure. This resolves an open question proposed by Karatzas and Fernholz (Handbook of Numerical Analysis, vol. 15, pp. 89–167, Elsevier, Amsterdam, 2009)

Topics: QA Mathematics
Publisher: Springer
Year: 2011
DOI identifier: 10.1007/s00780-011-0155-y
OAI identifier: oai:eprints.lse.ac.uk:38151
Provided by: LSE Research Online
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