Zhang, Mengzhe; Chan, Leunglung - In: Journal of risk and financial management : JRFM 15 (2022) 9, pp. 1-9
This paper evaluates the prices of European-style options when dynamics of the underlying asset is assumed to follow a Markov-switching Heston's stochastic volatility model. Under this framework, the expected return and the long-term mean of the variance of the underlying asset rely on states of...