In this paper we provide a guided tour through the valuation of passport opions, presented in the seminal paper of Anderset et al. The holder of the passport option has the right to choose a trading strategy on the underlinying financial asset. At maturity the holder receives the profits of such strategy, if positive. In case of a negative payout of the strategy, the position is closed withouth any obligation for the holder. Hence, a passport option is a call on the profits of a trading account. The pricing of this options is reduced to a stochastic control problem. Since the involved functions lack the usually regularity conditions, viscosity solutions are employed to solve the pricing problem.
|Numero di pagine||8|
|Stato di pubblicazione||Pubblicato - 2009|
- paassport options