Convexity of the optimal stopping boundary for the American put option

Ekström, Erik (2004) Convexity of the optimal stopping boundary for the American put option. Journal of Mathematical Analysis and Applications, 299 (1). pp. 147-156. ISSN 0022-247X

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Abstract

We show that the optimal stopping boundary for the American put option is convex in the standard Black-Scholes model. The methods are adapted from ice-melting problems and rely upon studying the behavior of level curves of solutions to certain parabolic differential equations.

Item Type: Article
Uncontrolled Keywords: Free boundary problems, Optimal stopping, Options
Subjects: MSC 2010, the AMS's Mathematics Subject Classification > 35 Partial differential equations
MSC 2010, the AMS's Mathematics Subject Classification > 91 Game theory, economics, social and behavioral sciences
Depositing User: Dr Erik Ekström
Date Deposited: 26 May 2006
Last Modified: 20 Oct 2017 14:12
URI: https://eprints.maths.manchester.ac.uk/id/eprint/300

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