Strict local martingale deflators and valuing American call-type options
Bayraktar, E., Kardaras, C.
& Xing, H.
(2011).
Strict local martingale deflators and valuing American call-type options.
Finance and Stochastics,
16(2), 275-291.
https://doi.org/10.1007/s00780-011-0155-y
& Xing, H.
(2011).
Strict local martingale deflators and valuing American call-type options.
Finance and Stochastics,
16(2), 275-291.
https://doi.org/10.1007/s00780-011-0155-y
We solve the problem of valuing and optimal exercise of American calltype options in markets which do not necessarily admit an equivalent local martingale measure. This resolves an open question proposed by Karatzas and Fernholz (Handbook of Numerical Analysis, vol. 15, pp. 89–167, Elsevier, Amsterdam, 2009).