ELLIOTT, ROBERT J.; SIU, TAK KUEN; CHAN, LEUNGLUNG - In: International Journal of Theoretical and Applied … 09 (2006) 06, pp. 825-841
In this paper we develop a method for pricing derivatives under a Markov switching version of the Heston-Nandi GARCH (1, 1) model by using a well known tool from actuarial science, namely the Esscher transform. We suppose that the dynamics of the GARCH process switch over time according to one...