Analysis of the Exercise Boundary of an American Interest Rate Option

YI Fa-huai; PENG Xin-ling; CHEN Ying-shan

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Article Navigation > Applied Mathematics and Mechanics > 2008 > 29(3): 369-378

YI Fa-huai, PENG Xin-ling, CHEN Ying-shan. Analysis of the Exercise Boundary of an American Interest Rate Option[J]. Applied Mathematics and Mechanics, 2008, 29(3): 369-378.

Citation:

YI Fa-huai, PENG Xin-ling, CHEN Ying-shan. Analysis of the Exercise Boundary of an American Interest Rate Option[J]. Applied Mathematics and Mechanics, 2008, 29(3): 369-378.

Citation:

YI Fa-huai, PENG Xin-ling, CHEN Ying-shan. Analysis of the Exercise Boundary of an American Interest Rate Option[J]. Applied Mathematics and Mechanics, 2008, 29(3): 369-378.

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Analysis of the Exercise Boundary of an American Interest Rate Option

School of Mathematical Sciences, South China Normal University, Guangzhou 510631, P. R. China

Received Date: 2007-09-11
Rev Recd Date: 2008-01-21
Publish Date: 2008-03-15

Abstract

Abstract

By applying the variational inequality technique, the behavior of the exercise boundary of the american-style interest rate option is analyzed under the assumption that the interest rates obey a mean-reverting random walk as given by the Vasicek model. The monotonicity, boundedness and C^∞-smoothness of the exercise boundary are proved.
- interest rate option,
- exercise boundary,
- variational inequality

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References(12)

References

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