JournalsifbVol. 17, No. 1pp. 69–92

Regularity of free boundary arising from optimal exercise of perpetual executive stock options

  • Cong Qin

    Soochow University, Jiangsu, China

  • Xinfu Chen

    University of Pittsburgh, United States

  • Xin Lai

    Harbin Institute of Technology, Heilongjiang, China

  • Wanghui Yu

    Soochow University, Jiangsu, China
Regularity of free boundary arising from optimal exercise of perpetual executive stock options cover
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Abstract

In this paper we convert a variational inequality modeling perpetual executive stock options to a degenerate Stefan type free boundary problem where the free boundary is related to the boundary of optimal exercise and non-exercise regions. We establish the regularity of the free boundary by solving directly the resulting free boundary problem.

Cite this article

Cong Qin, Xinfu Chen, Xin Lai, Wanghui Yu, Regularity of free boundary arising from optimal exercise of perpetual executive stock options. Interfaces Free Bound. 17 (2015), no. 1, pp. 69–92

DOI 10.4171/IFB/334