TY - JOUR
T1 - Hedging of swing game options in continuous time
AU - Iron, Yonatan
AU - Kifer, Yuri
PY - 2011/8
Y1 - 2011/8
N2 - This paper introduces and studies hedging for game (Israeli) style extension of swing options in continuous time considered as multiple exercise derivatives of a base security, evolving according to the geometric Brownian motion. Assuming that the underlying security can be traded without restrictions, we derive a formula for the valuation of multiple exercise options via classical hedging arguments. This paper extends to the continuous time case the discrete time valuation results which requires substantial additional machinery such as, for instance, regularity results for value processes of Dynkin's games and the study of multiple stopping Dynkin's games. Earlier papers on valuation of multiple exercise American options viewed it only as a multiple stopping problem.
AB - This paper introduces and studies hedging for game (Israeli) style extension of swing options in continuous time considered as multiple exercise derivatives of a base security, evolving according to the geometric Brownian motion. Assuming that the underlying security can be traded without restrictions, we derive a formula for the valuation of multiple exercise options via classical hedging arguments. This paper extends to the continuous time case the discrete time valuation results which requires substantial additional machinery such as, for instance, regularity results for value processes of Dynkin's games and the study of multiple stopping Dynkin's games. Earlier papers on valuation of multiple exercise American options viewed it only as a multiple stopping problem.
KW - game options
KW - hedging
KW - multiple exercise derivatives
KW - multiple optimal stopping
KW - swing options
UR - http://www.scopus.com/inward/record.url?scp=84859477249&partnerID=8YFLogxK
U2 - 10.1080/17442508.2010.510908
DO - 10.1080/17442508.2010.510908
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AN - SCOPUS:84859477249
SN - 1744-2508
VL - 83
SP - 365
EP - 404
JO - Stochastics
JF - Stochastics
IS - 4-6
ER -