A note on passport options

Marzia De Donno, A. Battauz

Risultato della ricerca: Contributo in rivistaArticolo in rivistapeer review

Abstract

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.
Lingua originaleEnglish
pagine (da-a)18-25
Numero di pagine8
RivistaPRAVARTAK
VolumeIV
Stato di pubblicazionePubblicato - 2009

Keywords

  • paassport options

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