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VALUATION OF STOCK LOANS WITH REGIME SWITCHING

Abstract:

This paper is concerned with stock loan valuation in which the underlying stock price is dictated by geometric Brownian motion with regime switchi ng. The stock loan pricing is quite different from that for standard American options because the associated variational inequalities may have infinitely many solutions. In addition, the optimal stopping time equals infinity with positive probability. Variational inequalities are used to establish values of stock loans and reasonable values of crit...

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Publication status:
Published

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Publisher copy:
10.1137/070708998

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Journal:
SIAM JOURNAL ON CONTROL AND OPTIMIZATION
Volume:
48
Issue:
3
Pages:
1229-1250
Publication date:
2009
DOI:
EISSN:
1095-7138
ISSN:
0363-0129
URN:
uuid:53730389-f970-4531-92e9-9e94bfadfd8f
Source identifiers:
149077
Local pid:
pubs:149077

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