Bounds for the range of American contingent claim prices in the jump-diffusion model
Volume 32 / 2005
Applicationes Mathematicae 32 (2005), 103-118
MSC: Primary 60H10;
Secondary 60J65, 60J75.
DOI: 10.4064/am32-1-8
Abstract
The problem of valuation of American contingent claims for a jump-diffusion market model is considered. Financial assets are described by stochastic differential equations driven by Gaussian and Poisson random measures. In such setting the money market is incomplete, thus contingent claim prices are not uniquely defined. For different equivalent martingale measures different arbitrage free prices can be derived. The problem is to find exact bounds for the set of all possible prices obtained in this way. The paper extends and improves some results of [BJ00].
