On the regularity of American options with regime-switching uncertainty

We study the regularity of the stochastic representation of the solution of a class of initial-boundary value problems related to a regime-switching diffusion. This representation is related to the value function of a finite-horizon optimal stopping problem such as the price of an American-style option in finance. We show continuity and smoothness of the value function using coupling and time-change techniques. As an application, we find the minimal payoff scenario for the holder of an American-style option in the presence of regime-switching uncertainty under the assumption that the transition rates are known to lie within level-dependent compact sets.Comment: 22 pages, to appear in Stochastic Processes and their Application

Los fondos personales, familiares y de empresas en la Universidad de Navarra / Yolanda Cagigas Ocejo

Comunicación presentada en el curso de verano "La hoja de ruta de los archivos personales, familiares y de empresa" organizado por el Archivo General de la Universidad de Navarra (septiembre, 2010)

Sancho el Sabio

Monográfico: Carmen Gómez, una vida al servicio de Sancho el Sabi