Showing 1 - 10 of 11,451
hedging strategy by using quadrature method. …
Persistent link: https://www.econbiz.de/10011559128
Persistent link: https://www.econbiz.de/10012622325
In this paper, we propose a general valuation framework for option pricing problems related to skew diffusions based on a continuous-time Markov chain approximation to the underlying stochastic process. We obtain an explicit closed-form approximation of the transition density of a general skew...
Persistent link: https://www.econbiz.de/10012868167
This paper investigates the American option price in a two-state regime-switching model. The dynamics of underlying are driven by a Markov-modulated Geometric Wiener process. That means the interest rate, the appreciation rate, and the volatility of underlying rely on hidden states of the...
Persistent link: https://www.econbiz.de/10012533592
We study both theoretically and empirically option prices on firms undergoing a cash merger offer. To estimate the merger's success probability, we use a Markov Chain Monte Carlo (MCMC) method using a state space representation of our model. Our estimated probability measure has significant...
Persistent link: https://www.econbiz.de/10011951308
Persistent link: https://www.econbiz.de/10012155050
We consider two sequences of Markov chains inducing equivalent measures on the discrete path space. We establish conditions under which these two measures converge weakly to measures induced on the Wiener space by weak solutions of two SDEs, which are unique in the sense of probability law. We...
Persistent link: https://www.econbiz.de/10011544749
Rough volatility models have recently been empirically shown to provide a good fit to historical volatility time series and implied volatility smiles of SPX options. They are continuous-time stochastic volatility models, whose volatility process is driven by a fractional Brownian motion with...
Persistent link: https://www.econbiz.de/10013322922
In this paper, we present a new approach with which American option price under a general regime-switching model with an arbitrary finite number of economic states can be efficiently computed without solving a system of $n$ differential equations simultaneously. Comparing with all the existing...
Persistent link: https://www.econbiz.de/10014239466
We present an approach for pricing American put options with a regime-switching volatility. Our method reveals that the option price can be expressed as the sum of two components: the price of a European put option and the premium associated with the early exercise privilege. Our analysis...
Persistent link: https://www.econbiz.de/10015054085