Viscosity Solutions and American Option Pricing in a Stochastic Volatility Model of the Ornstein-Uhlenbeck Type

Alexandre F. Roch

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arXiv · 0812.2444

Viscosity Solutions and American Option Pricing in a Stochastic Volatility Model of the Ornstein-Uhlenbeck Type

Alexandre F. Roch

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Abstract

In this paper, we study the valuation of American type derivatives in the stochastic volatility model of Barndorff-Nielsen and Shephard (2001). We characterize the value of such derivatives as the unique viscosity solution of an integral-partial differential equation when the payoff function satisfies a Lipschitz condition.

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Alexandre F. Roch. 2008-12-12. Viscosity Solutions and American Option Pricing in a Stochastic Volatility Model of the Ornstein-Uhlenbeck Type. https://arxiv.org/abs/0812.2444

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