On a Markov chain approximation method for option pricing with regime switching

DOI10.3934/JIMO.2016.12.529MaRDI QIDQ747024zbMATH OpenOpenAlexFDO

Authors Kun Fan, Yang Shen, Tak Kuen Siu, Rongming Wang

Publication date 22 October 2015

Published in Journal of Industrial and Management Optimization (Search for Journal in Brave)

Copyright license Creative Commons Attribution 4.0 International

Full work available at URL https://doi.org/10.3934/jimo.2016.12.529

zbMATH Keywords

Markov chain approximationoption pricingregime switching

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) Numerical methods (including Monte Carlo methods) (91G60)

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Cites work

• A Markov model for switching regressions
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• A note on differentiability in a Markov chain market using stochastic flows
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• Integration by parts and martingale representation for a Markov chain
• Markov chains. Models, algorithms and applications
• On pricing and hedging options in regime-switching models with feedback effect
• Option pricing and Esscher transform under regime switching
• Option pricing in a regime-switching model using the fast Fourier transform
• Option pricing with regime switching by trinomial tree method
• Pricing annuity guarantees under a double regime-switching model
• Pricing exotic options under regime switching
• Regime-switching risk: to price or not to price?
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• Threshold models in non-linear time series analysis

Cited in

(13)

• Option pricing when the regime-switching risk is priced
• Market complete option valuation using a Jarrow-Rudd pricing tree with skewness and kurtosis
• Continuous-time Markov chain and regime switching approximations with applications to options pricing
• Numerical methods for backward Markov chain driven Black-Scholes option pricing
• Convergence of estimated option price in a regime switching market
• scientific article; zbMATH DE number 1944280 (Why is no real title available?)
• Upper bounds for Bermudan options on Markovian data using nonparametric regression and a reduced number of nested Monte Carlo steps
• An FFT approach for option pricing under a regime-switching stochastic interest rate model
• Option pricing using a regime switching stochastic discount factor
• Stochastic Approximation Algorithms for Parameter Estimation in Option Pricing with Regime Switching
• Polynomial approximation to option prices under regime switching
• Valuation and optimal strategies for American options under a Markovian regime-switching model
• Lookback option pricing for regime-switching jump diffusion models

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