On barrier option pricing by Erlangization in a regime-switching model with jumps (Q2297114)

The main focus of this paper is the pricing of path-dependent options like digital options and down-and-out call options in a Markov modulated Brownian motion framework in the presence of two-sided phase-type jumps. As the authors claim this regime switching Lévy model structure remains analytically tractable when one studies the first passage time problem, i.e. the first time a stochastic process crosses a constant upper or lower threshold. The model turns out to be very useful for other applications as well, such as credit risk issues and derivatives.