Valuation for an American Continuous-Installment Put Option on Bond under Vasicek Interest Rate Model. (7th June 2009)

• Record Type: Journal Article
• Authors: Huang, Guoan; Deng, Guohe; Huang, Lihong
• Other Names: Yu Lean Academic Editor.
• Is Part Of: Journal of applied mathematics & decision sciences. Volume 2009(2009)
• Publication Date: 2009-06-07
• Subjects: Operations research -- Periodicals; Mathematical models -- Periodicals; Statistics -- Periodicals; Quality control -- Periodicals; Mathematical models; Operations research; Quality control; Statistics; Periodicals; 519.05
• DOI: 10.1155/2009/215163
• Languages: English
• ISSNs: 1173-9126

Abstract

Abstract : The valuation for an American continuous-installment put option on zero-coupon bond is considered by Kim's equations under a single factor model of the short-term interest rate, which follows the famous Vasicek model. In term of the price of this option, integral representations of both the optimal stopping and exercise boundaries are derived. A numerical method is used to approximate the optimal stopping and exercise boundaries by quadrature formulas. Numerical results and discussions are provided.