Option pricing under regime switching: Integration over simplexes method

被引：5
|
作者：
Jang, Bong-Gyu [1 ]
Tae, Hyeon-Wuk [1 ]
机构：
[1] POSTECH, Dept Ind & Management Engn, 77 Cheongam Ro, Pohang 37673, Gyeongbuk, South Korea
来源：
FINANCE RESEARCH LETTERS | 2018年 / 24卷
基金：
新加坡国家研究基金会;
关键词：
Option pricing; Regime switch; Commodity option; Stochastic volatility; Integration over simplex; EUROPEAN OPTIONS; TERM STRUCTURE; N-SIMPLEX; FORMULAS; COMMODITIES; VOLATILITY; VALUATION; AMERICAN; ECONOMY;
D O I：
10.1016/j.frl.2017.09.021
中图分类号：
F8 [财政、金融];
学科分类号：
0202 ;
摘要：
This paper aims to develop an alternative method for pricing European options under regime switching market conditions by representing their values as a sum of integrations over simplexes. We calculate the integrations by using the method of Grundmann and Moller (1978). The method is applicable to the valuation of European-type options written on underlying assets whose prices follow a regime-switching mean-reverting process as well as a conventional regime-switching geometric Brownian motion. Numerical examples provide evidence that this method can be a powerful tool for practitioners in option pricing.
引用
收藏
页码：301 / 312
页数：12
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