Tid: 12 december, 2016, kl 15.15-16.00.

Föredragshållare: Sören Christensen

Titel: Are American options European after all?

Abstract This talk addresses one of the fundamental problems in mathematical finance: pricing of American type options. Here, American type means that the holder has the right to exercise the option at any time point up to a pre-specified maturity time. Although the underlying theory is discussed in every introductory textbook, both the mathematical and applied treatment is challenging even in unrealistically simplified models such as a standard Black Scholes model. This is a fundamental difference to European style options. In this talk we discuss the question whether the value of an American option actually coincides in the continuation region with that of a properly chosen European payoff. In analytical terms this boils down to the question whether a harmonic function solving a free boundary problem can be extended to a harmonic function on the whole space. In cases where the answer is positive, this opens the door for very efficient new methods for treating American options for both theory and practice. The talk is mainly based on Christensen (2014) [Mathematical Finance 24, 156-172] and Christensen, Kallsen, Lenga (2016).

Till seminarielistan
To the list of seminars