Abstract
In this paper, the pricing of American options whose asset price dynamics follow Azzalini Itô-McKean skew Brownian motions is considered. The corresponding optimal stopping time problem is then formulated, and the main properties of its value function are provided. We show that if the payoff function is positive and decreasing, then the value function and its partial derivatives are continuous and locally bounded, and therefore several variational inequalities are derived. Furthermore, the Feyman-Kac formula is calculated. Finally, under this more general as well as very versatile setting, the Black-Scholes option pricing model is nested as a special case.
Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
