Strict local martingale deflators and pricing American call-type options
Tuesday, June 15, 2010 - 2:30pm - 3:30pm
We solve the problem of pricing and optimal exercise of American call-type options in markets which do not necessarily admit an equivalent local martingale measure. This resolves an open question proposed by Fernholz and Karatzas [Stochastic Portfolio Theory: A Survey, Handbook of Numerical Analysis, 15:89-168, 2009].
Joint work with Kostas Kardaras and Hao Xing. Available at http://arxiv.org/abs/0908.1082.