A hidden Markov regime-switching model for option valuation

被引：23

作者：

Liew, Chuin Ching ^{[1
]}

Siu, Tak Kuen ^{[1
]}

机构：

[1] Macquarie Univ, Dept Actuarial Studies, Fac Business & Econ, Sydney, NSW 2109, Australia

来源：

INSURANCE MATHEMATICS & ECONOMICS | 2010年 / 47卷 / 03期

基金：

澳大利亚研究理事会;

关键词：

Option pricing; Regime switching; Hidden Markov model; Esscher transform; Extended Girsanov principle; Filters and predictors; INSURANCE; GUARANTEES; PARAMETERS; POLICIES; PRICES;

D O I：

10.1016/j.insmatheco.2010.08.003

中图分类号：

F [经济];

学科分类号：

02 ;

摘要：

We investigate two approaches namely the Esscher transform and the extended Girsanov s principle for option valuation in a discrete-time hidden Markov regime-switching Gaussian model The model s parameters including the interest rate the appreciation rate and the volatility of a risky asset are governed by a discrete-time finite-state hidden Markov chain whose states represent the hidden states of an economy We give a recursive filter for the hidden Markov chain and estimates of model parameters using a filter-based EM algorithm We also derive predictors for the hidden Markov chain and some related quantities These quantities are used to estimate the price of a standard European call option Numerical examples based on real financial data are provided to illustrate the implementation of the proposed method (C) 2010 Elsevier B V All rights reserved

引用

页码：374 / 384

页数：11

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