Characterization of optimal stopping regions of American Asian and lookback options

Mim Dai, Yue Kuen Kwok

Research output: Journal article publicationJournal articleAcademic researchpeer-review

21 Citations (Scopus)

Abstract

A general framework is developed to analyze the optimal stopping (exercise) regions of American path-dependent options with either the Asian feature or lookback feature. We examine the monotonicity properties of the option values and stopping regions with respect to the interest rate, dividend yield, and time. From the ordering properties of the values of American lookback options and American Asian options, we deduce the corresponding nesting relations between the exercise regions of these American options. We illustrate how some properties of the exercise regions of the American Asian options can be inferred from those of the American lookback options.

Original languageEnglish
Pages (from-to)63-82
Number of pages20
JournalMathematical Finance
Volume16
Issue number1
DOIs
Publication statusPublished - Jan 2006

Keywords

  • American options
  • Asian feature
  • Lookback feature
  • Monotonicity properties
  • Optimal stopping

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Social Sciences (miscellaneous)
  • Economics and Econometrics
  • Applied Mathematics

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