Pricing American options with uncertain volatility through stochastic linear complementarity models |
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Authors: | Kenji Hamatani Masao Fukushima |
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Affiliation: | 1.Department of Applied Mathematics and Physics, Graduate School of Informatics,Kyoto University,Kyoto,Japan |
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Abstract: | We consider the problem of pricing American options with uncertain volatility and propose two deterministic formulations based on the expected value method and the expected residual minimization method for a stochastic complementarity problem. We give sufficient conditions that ensure the existence of a solution of those deterministic formulations. Furthermore we show numerical results and discuss the usefulness of the proposed approach. |
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