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dc.contributor.authorVanderbei, R.J.en_US
dc.contributor.authorPinar, M. Ç.en_US
dc.date.accessioned2016-02-08T10:00:57Z
dc.date.available2016-02-08T10:00:57Z
dc.date.issued2009en_US
dc.identifier.issn0036-1445
dc.identifier.urihttp://hdl.handle.net/11693/22502
dc.description.abstractA warrant is an option that entitles the holder to purchase shares of a common stock at some prespecified price during a specified interval. The problem of pricing a perpetual warrant (with no specified interval) of the American type (that can be exercised any time) is one of the earliest contingent claim pricing problems in mathematical economics. The problem was first solved by Samuelson and McKean in 1965 under the assumption of a geometric Brownian motion of the stock price process. It is a well-documented exercise in stochastic processes and continuous-time finance curricula. The present paper offers a solution to this time-honored problem from an optimization point of view using linear programming duality under a simple random walk assumption for the stock price process, thus enabling a classroom exposition of the problem in graduate courses on linear programming without assuming a background in stochastic processes.en_US
dc.language.isoEnglishen_US
dc.source.titleSIAM Reviewen_US
dc.relation.isversionofhttp://dx.doi.org/10.1137/080728366en_US
dc.subjectPricingen_US
dc.subjectPerpetual warranten_US
dc.subjectAmerican optionen_US
dc.subjectLinear programming, dualityen_US
dc.subjectLynamic programmingen_US
dc.subjectHarmonic functionsen_US
dc.subjectSecond-order difference equationsen_US
dc.titlePricing American perpetual warrants by linear programmingen_US
dc.typeArticleen_US
dc.departmentDepartment of Industrial Engineeringen_US
dc.citation.spage767en_US
dc.citation.epage782en_US
dc.citation.volumeNumber51en_US
dc.citation.issueNumber4en_US
dc.identifier.doi10.1137/080728366en_US
dc.publisherSociety for Industrial and Applied Mathematicsen_US
dc.identifier.eissn1095-7200


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