American Passport options in an exponential L\'evy model

Zakaria Marah

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arXiv · 2307.16649

American Passport options in an exponential L\'evy model

Zakaria Marah

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Abstract

In this paper we examine the problem of valuing an exotic derivative known as the American passport option where the underlying is driven by a L\'evy process. The passport option is a call option on a trading account. We derive the pricing equation, using the dynamic programming principle, and prove that the option value is a viscosity solution of variational inequality. We also establish the comparison principle, which yields uniqueness and the convexity of the viscosity solution.

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Zakaria Marah. 2023-07-31. American Passport options in an exponential L\'evy model. https://arxiv.org/abs/2307.16649

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