Please use this identifier to cite or link to this item: http://hdl.handle.net/1783.1/1878

Optimal shouting policies of options with shouting rights

Authors Dai, Min
Kwok, Yue Kuen
Wu, Lixin
Issue Date 2001-01-20
Source Submitted to Mathematical finance
Summary The shouting (resettable) right embedded in an option contract is defined to be the privilege given to the option holder to reset certain terms in the contract according to specified rules at the moment of shouting, where the time to shout is chosen by the holder. This paper develops the framework of analyzing the optimal shouting policies to be adopted by the holder of an option with single and multiple shouting rights. It is most interesting to observe that the optimal shouting boundary depends on the relative values of the riskless interest rate and dividend yield. The monotonicity properties and the asymptotic behaviors at limiting zero value and infinite value of time to expiry associated with the shouting boundaries are examined. For the shout floor with single and multiple shouting rights, we obtain an analytic representation of the price function.
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Language English
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