An Integration by Parts Type Formula for Stopping Times and its Application

Tomonori Nakatsu

doi:10.1007/s11009-016-9512-9

An Integration by Parts Type Formula for Stopping Times and its Application

Research output: Contribution to journal › Article › peer-review

Abstract

In this article, we shall prove an integration by parts (IBP) type formula for stopping times. In order to obtain the formula, we will first construct a process which works as if it is an “alarm clock” telling us whether the stopping times are already achieved or not. Then, we shall use the Girsanov theorem. Applications of the formula to the numerical computation of the risk called the delta for options depending on the stopping times will be also considered and show the gain of efficiency compared with a classical method.

Original language	English
Pages (from-to)	751-773
Number of pages	23
Journal	Methodology and Computing in Applied Probability
Volume	19
Issue number	3
DOIs	https://doi.org/10.1007/s11009-016-9512-9
Publication status	Published - 2017 Sept 1
Externally published	Yes

Keywords

American option
Greeks
Integration by parts
Stochastic differential equation
Stopping time

ASJC Scopus subject areas

Statistics and Probability
Mathematics(all)

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10.1007/s11009-016-9512-9

Cite this

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An Integration by Parts Type Formula for Stopping Times and its Application

Abstract

Keywords

ASJC Scopus subject areas

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