The Dynkin game with regime switching and applications to pricing game options

2020 ◽  
Author(s):  
Siyu Lv ◽  
Zhen Wu ◽  
Qing Zhang
Keyword(s):  
Regime Switching ◽  
Dynkin Game ◽  
Game Options

scholarly journals Error Estimates for Binomial Approximations of Game Put Options

2014 ◽  
Vol 2014 ◽  
pp. 1-26
Author(s):  
Yonatan Iron ◽  
Yuri Kifer
Keyword(s):  
Error Estimates ◽  
Free Boundaries ◽  
Fair Price ◽  
Put Options ◽  
American Put Options ◽  
Dynkin Game ◽  
Game Options ◽  
Expiration Time ◽  
Binomial Approximation ◽  
The Right

A game or Israeli option is an American style option where both the writer and the holder have the right to terminate the contract before the expiration time. Kifer (2000) shows that the fair price for this option can be expressed as the value of a Dynkin game. In general, there are no explicit formulas for fair prices of American and game options and approximations are used for their computations. The paper by Lamberton (1998) provides error estimates for binomial approximation of American put options and here we extend the approach of Lamberton (1998) in order to obtain error estimates for binomial approximations of game put options which is more complicated as it requires us to deal with two free boundaries corresponding to the writer and to the holder of the game option.

Sign in / Sign up

Export Citation Format

Share Document