Recovering a time-homogeneous stock price process from perpetual option prices
classification
🧮 math.PR
q-fin.PR
keywords
priceperpetualpricesstocktime-homogeneousamericangivenoption
read the original abstract
It is well known how to determine the price of perpetual American options if the underlying stock price is a time-homogeneous diffusion. In the present paper we consider the inverse problem, that is, given prices of perpetual American options for different strikes, we show how to construct a time-homogeneous stock price model which reproduces the given option prices.
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