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

DOI10.1007/S13160-022-00538-7zbMATH Open1505.91382OpenAlexW4296117267MaRDI QIDQ2111571FDOQ2111571

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

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zbMATH Keywords

regime switchingEuropean optionsstochastic volatilityclosed-formstochastic long-term mean

Mathematics Subject Classification ID

Applications of Markov chains and discrete-time Markov processes on general state spaces (social mobility, learning theory, industrial processes, etc.) (60J20) Derivative securities (option pricing, hedging, etc.) (91G20)

Cites Work

• The pricing of options and corporate liabilities
• 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
• Robust Approximations for Pricing Asian Options and Volatility Swaps Under Stochastic Volatility
• 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?

Cited In (5)

• On pricing options under two stochastic volatility processes
• A closed-form approximation formula for pricing European options under a three-factor model
• A closed-form pricing formula for forward start options under a regime-switching stochastic volatility model
• A note on ``A closed-form pricing formula for European options under the Heston model with stochastic interest rate
• Analytically pricing European options with a two-factor Stein-Stein model

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