Pricing perpetual American straddle option driven by bifractional Black-Scholes model

Abstract

Abstract This paper addresses the pricing of perpetual American straddle options under the bifractional Black-Scholes model. We use the comparison principle for the variational inequality to analyze the behaviour of exercise boundaries for the perpetual American straddle option with a constant dividend yield. The conclusion is derived that it has two exercise boundary points with a constant dividend yield and only one free boundary point with zero dividend yield, which is consistent with the financial context.