Topics in pricing American type financial contracts

Date
2007-01-01
Authors
Meng, Qiang
Major Professor
Advisor
Ananda Weerasinghe
Committee Member
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Altmetrics
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Mathematics
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Mathematics
Abstract

In this thesis we study three pricing problems related to American type financial contracts: firstly, we derive a closed form upper bound for American put options. This upper bound can be used in conjunction with traditional Monte Carlo simulation, which usually generates a lower bound, to obtain a better estimate for the option price; secondly, we solve an optimal control problem and derive an optimal strategy for the owner of a stock which is subject to default risk; thirdly, we prove an ordering result for American options with a piecewise linear payoff under a family of equivalent martingale measures used in stochastic volatility models.

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