Finite maturity margin call stock loans

Authors

Xiaoping Lu, University of WollongongFollow
Endah Putri, University of WollongongFollow

RIS ID

104205

Publication Details

Lu, X. & Putri, E. R M. (2016). Finite maturity margin call stock loans. Operations Research Letters, 44 (1), 12-18.

Abstract

In this paper, we formulate margin call stock loans in finite maturity as American down-and-out calls with rebate and time-dependent strike. The option problem is solved semi-analytically based on the approach in Zhu (2006). An explicit equation for optimal exit price and a pricing formula for loan value are obtained in Laplace space. Final results are obtained by numerical inversion. Examples are provided to show the dependency of the optimal exit price and margin call stock loan value on various parameters.