A closed-form pricing formula for European options under a new three-factor stochastic volatility model with regime switching

DOI10.1007/s13160-022-00538-7zbMath1505.91382MaRDI QIDQ2111571

Sha Lin, Xin-Jiang He

Publication date: 17 January 2023

Published in: Japan Journal of Industrial and Applied Mathematics (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1007/s13160-022-00538-7

zbMATH Keywords

stochastic volatility; regime switching; European options; closed-form; stochastic long-term mean

Mathematics Subject Classification ID

60J20: Applications of Markov chains and discrete-time Markov processes on general state spaces (social mobility, learning theory, industrial processes, etc.)

91G20: Derivative securities (option pricing, hedging, etc.)

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Analytically pricing European options with a two-factor Stein-Stein model

Cites Work

• The Pricing of Options and Corporate Liabilities
• A closed-form pricing formula for European options under a new stochastic volatility model with a stochastic long-term mean
• How should a local regime-switching model be calibrated?
• Robust Approximations for Pricing Asian Options and Volatility Swaps Under Stochastic Volatility
• A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options
• Pricing variance and volatility swaps in a stochastic volatility model with regime switching: discrete observations case