Abstract.
Recently Kifer (2000) introduced the concept of an Israeli (or Game) option. That is a general American-type option with the added possibility that the writer may terminate the contract early inducing a payment exceeding the holder’s claim had they exercised at that moment. Kifer shows that pricing and hedging of these options reduces to evaluating a saddle point problem associated with Dynkin games. In this short text we give two examples of perpetual Israeli options where the solutions are explicit.
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Received: December 2002,
Mathematics Subject Classification:
90A09, 60J40, 90D15
JEL Classification:
G13, C73
I would like to express thanks to Chris Rogers for a valuable conversation.
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Kyprianou, A.E. Some calculations for Israeli options. Finance and Stochastics 8, 73–86 (2004). https://doi.org/10.1007/s00780-003-0104-5
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DOI: https://doi.org/10.1007/s00780-003-0104-5