ON A MARKOV CHAIN APPROXIMATION METHOD FOR OPTION PRICING WITH REGIME SWITCHING

被引：1

作者：

Fan, Kun ^{[1
]}

Shen, Yang ^{[2
,3
]}

Siu, Tak Kuen ^{[4
]}

Wang, Rongming ^{[1
]}

机构：

[1] E China Normal Univ, Sch Finance & Stat, Shanghai 200241, Peoples R China

[2] Univ New S Wales, Sch Risk & Actuarial Studies, Sydney, NSW 2052, Australia

[3] Univ New S Wales, CEPAR, UNSW Business Sch, Sydney, NSW 2052, Australia

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

来源：

JOURNAL OF INDUSTRIAL AND MANAGEMENT OPTIMIZATION | 2016年 / 12卷 / 02期

基金：

中国国家自然科学基金;

关键词：

Option pricing; regime switching; Markov chain approximation; VALUATION;

D O I：

10.3934/jimo.2016.12.529

中图分类号：

T [工业技术];

学科分类号：

08 ;

摘要：

In this paper, we discuss a Markov chain approximation method to price European options, American options and barrier options in a Markovian regime-switching environment. The model parameters are modulated by a continuous-time, finite-state, observable Markov chain, whose states represent the states of an economy. After selecting an equivalent martingale measure by the regime-switching Esscher transform, we construct a discrete-time, inhomogeneous Markov chain to approximate the dynamics of the logarithmic stock price process. Numerical examples and empirical analysis are used to illustrate the practical implementation of the method.

引用

页码：529 / 541

页数：13

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