When are Swing options bang-bang and how to use it

Abstract : In this paper we investigate a class of swing options with firm constraints in view of the modeling of supply agreements. We show, for a fully general payoff process, that the premium, solution to a stochastic control problem, is concave and piecewise affine as a function of the global constraints of the contract. The existence of bang-bang optimal controls is established for a set of constraints which generates by affinity the whole premium function. When the payoff process is driven by an underlying Markov process, we propose a quantization based recursive backward procedure to price these contracts. A priori error bounds are established, uniformly with respect to the global constraints.
Type de document :
Article dans une revue
International Journal of Theoretical and Applied Finance, World Scientific Publishing, 2010, 13 (6), 867-899 ; http://dx.doi.org/10.1142/S0219024910006030. <10.1142/S0219024910006030>
Liste complète des métadonnées


https://hal.archives-ouvertes.fr/hal-00144517
Contributeur : Gilles Pagès <>
Soumis le : jeudi 3 mai 2007 - 15:46:20
Dernière modification le : mardi 11 octobre 2016 - 13:55:29
Document(s) archivé(s) le : mercredi 7 avril 2010 - 02:13:05

Fichiers

Swing_final.pdf
Fichiers produits par l'(les) auteur(s)

Identifiants

Collections

PMA | INSMI | UPMC | USPC

Citation

Olivier Bardou, Sandrine Bouthemy, Gilles Pagès. When are Swing options bang-bang and how to use it. International Journal of Theoretical and Applied Finance, World Scientific Publishing, 2010, 13 (6), 867-899 ; http://dx.doi.org/10.1142/S0219024910006030. <10.1142/S0219024910006030>. <hal-00144517>

Partager

Métriques

Consultations de
la notice

255

Téléchargements du document

162