In this paper we develop a discrete-time pricing model for European options where the log-return of the underlying asset is subject to discontinuous regime shifts in its mean and/or volatility which follow a Markov chain. The model allows for multiple regime shifts whose risk cannot be hedge out...

This paper derives a general equilibrium option pricing model for a European call assuming that the economy is exogenously driven by a dividend process following Hamilton's (1989) Markov regime switching model. The derived formula is used to investigate if the European call option prices are...

In this paper we introduce a pricing model for a European call option when the price of the underlying stock (asset) follows a random walk with Markov chain type of shifts in the drift and volatility parameters according to the regime that the stock market lies in, at a given period of time. We...

This paper derives a general equilibrium option-pricing model for a European call assuming that the economy is exogenously driven by a dividend process following Hamilton's (1989) Markov regime switching model. The derived formula is used to investigate if the European call option prices are...

In this paper we introduce a pricing model for a European call option when the price of the underlying stock (asset) follows a random walk with Markov Chain type of shifts in the drift and volatility parameters according to the regime that the stock market lies in, at a given period of time. We...

In this paper we introduce a discrete time pricing model for a European call option when the log-return of the underlying stock (asset) is subject to discontinuous market regime type of shifts in its mean or volatility whose risk can be priced in the market. The paper shows how to estimate this...