An Israeli option (also referred to as game option or recall option) generalizes an American option by also allowing the seller to cancel the option prematurely, but at the expense of some penalty. Kifer  shows that in the classical Black-Scholes market such contracts have unique no-arbitrage prices. In Kyprianou  and Kuumlhn and Kyprianou  characterizations were obtained for the price of two classes of Israeli options. For the general case, we give a dual resp. pathwise pricing formula similar to Rogers  and investigate this approach numerically.
|Number of pages||22|
|Journal||Stochastics: an international journal of probability and stochastic processes|
|Publication status||Published - Feb 2007|