Option pricing model based on a Markov-modulated diffusion with jumps
From MaRDI portal
Publication:985996
Abstract: The paper proposes a class of financial market models which are based on inhomogeneous telegraph processes and jump diffusions with alternating volatilities. It is assumed that the jumps occur when the tendencies and volatilities are switching. We argue that such a model captures well the stock price dynamics under periodic financial cycles. The distribution of this process is described in detail. For this model we obtain the structure of the set of martingale measures. This incomplete model can be completed by adding another asset based on the same sources of randomness. Explicit closed-form formulae for prices of the standard European options are obtained for the completed market model.
Recommendations
Cites work
- scientific article; zbMATH DE number 45955 (Why is no real title available?)
- scientific article; zbMATH DE number 1095739 (Why is no real title available?)
- scientific article; zbMATH DE number 796445 (Why is no real title available?)
- scientific article; zbMATH DE number 6137478 (Why is no real title available?)
- A Subordinated Stochastic Process Model with Finite Variance for Speculative Prices
- A jump telegraph model for option pricing
- A link between wave governed random motions and ruin processes
- A stochastic model related to the telegrapher's equation
- An application of hidden Markov models to asset allocation problems
- Generalized integrated telegraph processes and the distribution of related stopping times
- Markov-modulated diffusion risk models
- ON DIFFUSION BY DISCONTINUOUS MOVEMENTS, AND ON THE TELEGRAPH EQUATION
- On prices' evolutions based on geometric telegrapher's process
- Option Pricing With Markov-Modulated Dynamics
- Option Pricing in Stochastic Volatility Models of the Ornstein‐Uhlenbeck type
- Option pricing when underlying stock returns are discontinuous
- Probabilistic analysis of the telegrapher's process with drift by means of relativistic transformations
- Russian and American put options under exponential phase-type Lévy models.
- The pricing of options and corporate liabilities
Cited in
(21)- A two-state neuronal model with alternating exponential excitation
- Markov-modulated jump-diffusion models for the short rate: pricing of zero coupon bonds and convexity adjustment
- scientific article; zbMATH DE number 6174812 (Why is no real title available?)
- Option pricing under jump-diffusion processes with regime switching
- Optimal dividend policy when cash surplus follows the telegraph process
- Hypo-exponential distributions and compound Poisson processes with alternating parameters
- Differential and integral equations for jump random motions
- Jump telegraph processes and financial markets with memory
- Switched diffusion processes for non-convex optimization and saddle points search
- Option pricing and CVaR hedging in the regime-switching telegraph market model
- Pricing and hedging catastrophe equity put options under a Markov-modulated jump diffusion model
- Option pricing under a jump-telegraph diffusion model with jumps of random size
- Option pricing driven by a telegraph process with random jumps
- First crossing times of telegraph processes with jumps
- Generalized Telegraph Process with Random Jumps
- Double Telegraph Processes and Complete Market Models
- First passage time moments of jump-diffusions with Markovian switching
- scientific article; zbMATH DE number 6453605 (Why is no real title available?)
- Self-exciting piecewise linear processes
- Probability law and flow function of Brownian motion driven by a generalized telegraph process
- Telegraph processes with random jumps and complete market models
This page was built for publication: Option pricing model based on a Markov-modulated diffusion with jumps
Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q985996)
