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Research papers

Pricing of perpetual Bermudan options

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Pages 432-442 | Received 03 Oct 2001, Accepted 15 Oct 2002, Published online: 15 Jul 2010
 

Abstract

We consider perpetual Bermudan options and more general perpetual American options in discrete time. For wide classes of processes and pay‐offs, we obtain exact analytical pricing formulae in terms of the factors in the Wiener‐Hopf factorization formulae. Under additional conditions on the process, we derive simpler approximate formulae.

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