Liew, Chuin Ching; Siu, Tak Kuen - In: Insurance: Mathematics and Economics 47 (2010) 3, pp. 374-384
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...