Regularity of the impulse control problem for a non-degenerate n-dimensional jump diffusion with infinite activity and finite variation jumps was recently examined in [4]. Here we extend the analysis to include infinite activity and infinite variation jumps. More specifically, we show that the value function u of the impulse control problem satisfies u ∈ W 2,p loc (R n ).

Abstract. This paper examines the valuation of a generalized American-style option known as a Game-style call option in an infinite time horizon setting.The specifications of this contract allow the writer to terminate the call option at any point in time for a fixed penalty amount paid directly to the holder.Valuation of a perpetual Game-style put option was addressed by Kyprianou (2004) in a Black-Scholes setting on a non-dividend paying asset. Here, we undertake a similar analysis for the perpetual call option in the presence of dividends and find qualitatively different explicit representations for the value function depending on the relationship between the interest rate and dividend yield. Specifically, we find that the value function is not convex when r > d.Numerical results show the impact this phenomenon has upon the vega of the option.

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We consider the problem of a seller who faces an unknown number of offers where each offer is a random draw from a known distribution. The objective of the seller is to maximize the probability that the highest offer is chosen. We show that the optimal strategy is characterized by a nonincreasing stochastic set of reservation prices. We also provide numerical analysis to calibrate the model and provide support to the observation that first offers in residential real estate markets tend to be higher than subsequent offers. The model's prediction closely matches the empirical findings of Merlo and Ortalo‐Magné that more than 70% of the properties sell to the buyer who makes the first offer.

Purpose Whereas much of previous literature focuses upon the impact on yields from the Federal Reserve’s large-scale asset purchases (LSAPs), the purpose of this paper is to study the changes to expected returns. Design/methodology/approach This empirical investigation offers support for changes to risk premia coincident with LSAPs. Findings For both equity and bonds, the authors find evidence for supply/demand LSAPs effects; the equity effects are consistent with a substitution effect from bonds to equities, whereas the bond effects appear to be an anomaly. Originality/value The findings represent new insight for weighing the efficacy and identifying the scope of LSAPs.