Volatility and Dividend Risk in Perpetual American Options

@article{Montero2006VolatilityAD,
  title={Volatility and Dividend Risk in Perpetual American Options},
  author={Miquel Montero},
  journal={Journal of Statistical Mechanics: Theory and Experiment},
  year={2006},
  volume={2007},
  pages={04002}
}
  • M. Montero
  • Published 9 October 2006
  • Economics
  • Journal of Statistical Mechanics: Theory and Experiment
American options are financial instruments that can be exercised at any time before expiration. In this paper we study the problem of pricing this kind of derivatives within a framework in which some of the properties --volatility and dividend policy-- of the underlaying stock can change at a random instant of time, but in such a way that we can forecast their final values. Under this assumption we can model actual market conditions because some of the most relevant facts that may potentially… 
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