Arbeitspapier
Minimum Guaranteed Payments and Costly Cancellation Rights: A Stopping Game Perspective
We consider the valuation and optimal exercise policy of a δ- penalty minimum guaranteed payment option in the case where the value of the underlying dividend-paying asset follows a linear diffusion. We characterize both the value and optimal exercise policy of the considered game option explicitly and demonstrate that increased volatility increases the value of the option and postpones exercise by expanding the continuation region where exercising is suboptimal. An interesting and natural implication of this finding is that the value of the embedded cancellation rights of the issuer increase as volatility increases.
- Sprache
-
Englisch
- Erschienen in
-
Series: Discussion paper ; No. 12
- Klassifikation
-
Wirtschaft
Asset Pricing; Trading Volume; Bond Interest Rates
Stochastic and Dynamic Games; Evolutionary Games; Repeated Games
Optimization Techniques; Programming Models; Dynamic Analysis
- Thema
-
minimum guaranteed payment
δ-penalty options
Dynkin games
linear diffusions
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Alvarez, Luis H. R.
- Ereignis
-
Veröffentlichung
- (wer)
-
Aboa Centre for Economics (ACE)
- (wo)
-
Turku
- (wann)
-
2006
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:42 MEZ
Datenpartner
Dieses Objekt wird bereitgestellt von:
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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Alvarez, Luis H. R.
- Aboa Centre for Economics (ACE)
Entstanden
- 2006
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