What is it about?
With an optimal stopping problem and the exercise boundary, the explicit integral representation of early exercise premium and the critical exercise price are also derived. Numerical simulation illustrates the asymptotic behavior of this critical boundary
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Why is it important?
We compare theoretical exercise prices of some assumptive options among the following models: the pure mixed fBm (hereafter pmfBm), the jump-diffusion Brownian motion (hereafter jdBm), and our MJD-fBm.
Perspectives
The non-positive skewness of returns becomes more negative as market volatility rises. Consequently, the critical exercise prices also could serve as an accurate indicator for investor fear.
Zhaoqiang Yang
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This page is a summary of: A NEW STOPPING PROBLEM AND THE CRITICAL EXERCISE PRICE FOR AMERICAN FRACTIONAL LOOKBACK OPTION IN A SPECIAL MIXED JUMP-DIFFUSION MODEL, Probability in the Engineering and Informational Sciences, September 2018, Cambridge University Press,
DOI: 10.1017/s0269964818000311.
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