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The smooth-fit property in an exponential Lévy model

Damien Lamberton 1, 2 Mohammed Mikou 1
2 MATHRISK - Mathematical Risk handling
Inria Paris-Rocquencourt, UPEM - Université Paris-Est Marne-la-Vallée, ENPC - École des Ponts ParisTech
Abstract : We study the smooth-fit property of the American put price with finite maturity in an exponential Lévy model when the underlying stock pays dividends at a continuous rate. As in the perpetual case, a regularity property is sufficient for smooth-fit to occur. We also derive conditions on the Lévy measure under which smooth-fit fails.
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  • HAL Id : hal-00677327, version 1

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Damien Lamberton, Mohammed Mikou. The smooth-fit property in an exponential Lévy model. Journal of Applied Probability, Applied Probability Trust, 2012, 49 (1), pp.137-149. ⟨hal-00677327⟩

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