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dc.contributor.authorDokuchaev, Nikolai
dc.identifier.citationDokuchaev, Nikolai. 2013. Continuously controlled options: derivatives with added flexibility. International Journal of Theoretical and Applied Finance 16 (1): 1350003 (23 pages).

The paper introduces special options such that the holder selects dynamically a continuous time process controlling the distribution of the payments (benefits) over time. For instance, the holder can select dynamically the quantity of a commodity purchased or sold by a fixed price given constraints on the cumulative quantity. In a modification of the Asian option, the control process can represent the averaging kernel describing the distribution of the purchases. The pricing of these options requires to solve special stochastic control problems with constraints for the cumulative control similar to a knapsack problem. Some existence results and pricing rules are obtained via modifications of parabolic Bellman equations.

dc.publisherWorld Scientific
dc.subjectcontrolled options
dc.subjectknapsack problem
dc.subjectexotic options
dc.subjectHJB equation
dc.subjectstochastic control
dc.subjectcontinuous time market
dc.titleContinuously controlled options: derivatives with added flexibility
dc.typeJournal Article
dcterms.source.endPage23 pages
dcterms.source.titleInternational Journal of Theoretical and Applied Finance

Electronic version of an article published as International Journal of Theoretical and Applied Finance 16:1 (2013) p.1350003 doi: 10.1142/S0219024913500039 © copyright World Scientific Publishing Company

curtin.accessStatusOpen access

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