Lithuanian Mathematical Journal

, Volume 51, Issue 1, pp 106–119 | Cite as

Perpetual American maximum options with Markov-modulated dynamics



In this paper, we deal with the valuation problem of two-asset perpetual American maximum options with Markov-modulated dynamics, in which the asset price processes are driven by a hidden Markov chain. We give the optimal stopping time rule and derive explicit pricing formulas by solving a series of variational inequalities. A proof of optimality for the result is performed in the end.


perpetual options Markov-modulated dynamics optimal stopping time Markov chain 


90A09 60J27 35K20 60H30 60J60 


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Copyright information

© Springer Science+Business Media, Inc. 2011

Authors and Affiliations

  1. 1.Faculty of Mathematics and PhysicsHuaiyin Institute of TechnologyHuai’anPR China

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