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Option Pricing with Markov Switching
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並列摘要
In this article, we consider a model of time-varying volatility which generalizes the classical Black-Scholes model to include regime-switching properties. Specifically, the unobservable state variables for stock fluctuations are modeled by a Markov process, and the drift and volatility parameters take different values depending on the state of this hidden Markov process. We provide a closed-form formula for the arbitrage-free price of the European call option, when the hidden Markov process has finite number of states. Two simulation methods, the discrete diffusion method and the Markovian tree method, for computing the European call option price are presented for comparison.
被引用紀錄
Lin, Y. L. (2010). Credit Portfolio Risk Management with Heavy-Tailed Risk Factors [master's thesis, National Tsing Hua University]. Airiti Library. https://doi.org/10.6843/NTHU.2010.00351
延伸閱讀
- Chiang, M. H. (2008). Option Pricing Based on the Alternating Direction Implicit Finite Difference Method. 風險管理學報, 10(1), 5-28. https://doi.org/10.30003/JRM.200803.0001
- Li, J. Z., & Ma, S. X. (2013). Pricing Options with Credit Risk in Markovian Regime-Switching Markets. Journal of Applied Mathematics, 2013(), 221-229-525. https://doi.org/10.1155/2013/621371
- 林丙輝（1998）。Option Pricing in Imperfect Markets: A Comment。中國財務學刊，5(3)，55-60。https://doi.org/10.6545/JoFS.1998.5(3).3
- Chen, C. C. (2012). Efficient option pricing with importance sampling [master's thesis, National Central University]. Airiti Library. https://www.airitilibrary.com/Article/Detail?DocID=U0031-1903201314435791
- Chen, C. C., Fuh, C. D., & Teng, H. W. (2013). Efficient Option Pricing with Importance Sampling. 中國統計學報, 51(3), 253-273. https://www.airitilibrary.com/Article/Detail?DocID=05296528-201309-201309020004-201309020004-253-273