We consider portfolio optimization in a regime-switching market. The assets of the portfolio are modeled through a hidden Markov model (HMM) in discrete time, where drift and volatility of the single assets are allowed to switch between different states. We consider different parametrizations of...

In this article, we present an innovative hybrid model for the valuation of equity options. Our approach includes stochastic volatility according to Heston (1993) and features a stochastic interest rate that follows a three-factor short rate model based on Hull-White (1994). Our model is of...

We employ Malliavin calculus techniques to compute the Delta of European type options in the presence of stochastic volatility. We obtain a general formula for the Malliavin weight and apply the derived formula to the well known models of Stein-Stein and Heston in order to show the numerical...

We investigate how ‘news sentiment' in general and the ‘impact of news' in particular can be utilised in designing equity trading strategies. News is an event that moves the market in a small way or a big way. We have introduced a derived measure of news impact score which takes into...