An alternative model of stochastic volatility for option pricing: a regime-switching diffusion model under fast mean reversion

MaRDI QIDQ3635263zbMATH OpenFDO

Authors Yu Sun, G. Yin

Publication date 6 July 2009

zbMATH Keywords

asymptotic expansionfast mean reversiontwo-time scale

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Central limit and other weak theorems (60F05) Continuous-time Markov processes on discrete state spaces (60J27) Asymptotic expansions of solutions to ordinary differential equations (34E05)

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Cited in

(6)

• Asymptotic expansions of option price under regime-switching diffusions with a fast-varying switching process
• Dynamics of a mean-reverting stochastic volatility equation with regime switching
• Convergence to Black-Scholes for ergodic volatility models
• Option price with stochastic volatility for both fast and slow mean-reverting regimes
• Option pricing in a regime switching stochastic volatility model
• Simple approximations for option pricing under mean reversion and stochastic volatility

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