Option Pricing with Regime Switching: Integrations over Simplexes Method
SSCI
SCOPUS
- Title
- Option Pricing with Regime Switching: Integrations over Simplexes Method
- Authors
- JANG, BONG GYU; TAE, HYEON WUK
- Date Issued
- 2018-03
- Publisher
- ACADEMIC PRESS INC ELSEVIER SCIENCE
- Abstract
- This paper aims to develop an alternative method for pricing European options under regime-switching market conditions by representing their values as a sum of integrations over simplexes. We calculate the integrations by using the method of Grundmann and Möller (1978). The method is applicable to the valuation of European-type options written on underlying assets whose prices follow a regime-switching mean-reverting process as well as a conventional regime-switching geometric Brownian motion. Numerical examples provide evidence that this method can be a powerful tool for practitioners in option pricing.
- URI
- https://oasis.postech.ac.kr/handle/2014.oak/41169
- DOI
- 10.1016/j.frl.2017.09.021
- ISSN
- 1544-6123
- Article Type
- Article
- Citation
- Finance Research Letters, vol. 24, page. 301 - 312, 2018-03
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- There are no files associated with this item.
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