Analytical Approximation Formula for Barrier Option Prices under the Regime-Switching Model

被引：3
|
作者：
He, Xin-Jiang [1 ]
Zhu, Song-Ping [1 ,2 ]
机构：
[1] Univ Wollongong, Sch Math & Appl Stat, Wollongong, NSW, Australia
[2] Tianjin Univ Finance & Econ China, Tianjin, Peoples R China
来源：
JOURNAL OF DERIVATIVES | 2019年 / 27卷 / 02期
关键词：
Analysis of individual factors/risk premia; factor-based models; options;
D O I：
10.3905/jod.2019.1.088
中图分类号：
F8 [财政、金融];
学科分类号：
0202 ;
摘要：
In this article barrier options are analytically evaluated under the regime-switching model, with the volatility of the underlying price being allowed to jump between different states following a Markov chain. The target barrier option prices are expressed in a Fourier cosine series after a particular approximation formula is obtained. The accuracy and efficiency of the newly derived formula are demonstrated through numerical experiments, demonstrating the formula's potential for practical applications.
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页码：108 / 119
页数：12
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