The integral option in a model with jumps
Gapeev, P. V.
(2008).
The integral option in a model with jumps.
Statistics and Probability Letters,
78(16), 2623-2631.
https://doi.org/10.1016/j.spl.2008.02.028
(2008).
The integral option in a model with jumps.
Statistics and Probability Letters,
78(16), 2623-2631.
https://doi.org/10.1016/j.spl.2008.02.028
We present a closed form solution to be considered in Kramkov and Mordecki [Kramkov, D.O., Mordecki, E., 1994. Integral option. Theory of Probability and its Applications 39 (1), 201–211] optimal stopping problem for the case of geometric compound Poisson process with exponential jumps. The method of proof is based on reducing the initial problem to an integro-differential free-boundary problem and solving the latter by using continuous and smooth fit. The result can be interpreted as pricing perpetual integral options in a model with jumps.