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Author : Nicolas P. B. Bollen
Publisher :
ISBN 13 :
Total Pages : 170 pages
Book Rating : 4.:/5 (375 download)
Download or read book The Valuation of Options in Regime-switching Models written by Nicolas P. B. Bollen and published by . This book was released on 1997 with total page 170 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Masahiko Egami
Publisher :
ISBN 13 :
Total Pages : 28 pages
Book Rating : 4.:/5 (13 download)
Download or read book A Direct Solution Method for Pricing Options in Regime-Switching Models written by Masahiko Egami and published by . This book was released on 2018 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: Pricing financial or real options with arbitrary payoffs in regime-switching models is an important problem in finance. Mathematically, it is to solve, under certain standard assumptions, a general form of optimal stopping problems in regime-switching models. In this article, we reduce an optimal stopping problem with an arbitrary value function in a two-regime environment to a pair of optimal stopping problems without regime switching. We then propose a method for finding optimal stopping rules using the techniques available for non-switching problems. In contrast to other methods, our systematic solution procedure is more direct since we first obtain the explicit form of the value functions. In the end, we discuss an option pricing problem which may not be dealt with by the conventional methods, demonstrating the simplicity of our approach.
Author : Elham Sohrabi
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (14 download)
Download or read book Option Valuation Under a Regime-Switching Model Using the Fast Fourier Transform written by Elham Sohrabi and published by . This book was released on 2018 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Houmin Yan
Publisher : Springer Science & Business Media
ISBN 13 : 0387338152
Total Pages : 397 pages
Book Rating : 4.3/5 (873 download)
Download or read book Stochastic Processes, Optimization, and Control Theory: Applications in Financial Engineering, Queueing Networks, and Manufacturing Systems written by Houmin Yan and published by Springer Science & Business Media. This book was released on 2006-09-10 with total page 397 pages. Available in PDF, EPUB and Kindle. Book excerpt: This edited volume contains 16 research articles. It presents recent and pressing issues in stochastic processes, control theory, differential games, optimization, and their applications in finance, manufacturing, queueing networks, and climate control. One of the salient features is that the book is highly multi-disciplinary. The book is dedicated to Professor Suresh Sethi on the occasion of his 60th birthday, in view of his distinguished career.
Author : Kun Fan
Publisher :
ISBN 13 :
Total Pages : 198 pages
Book Rating : 4.:/5 (89 download)
Download or read book Valuation of Financial Derivatives Under Regime Switching Models written by Kun Fan and published by . This book was released on 2014 with total page 198 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Evgenia V. Chunikhina
Publisher :
ISBN 13 :
Total Pages : 72 pages
Book Rating : 4.:/5 (898 download)
Download or read book Valuing Options in a Discrete Time Regime Switching Model with Jumps written by Evgenia V. Chunikhina and published by . This book was released on 2014 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this work, we provide a detailed analysis of a discrete time regime switching financial market model with jumps. We consider the model under two different scenarios: known and unknown initial regime. For each scenario we investigated conditions that guarantee the model's completeness. We find that the model under consideration is arbitrage-free and complete if the initial regime is known and the jump size satisfies specific condition. Formulae for a unique risk-neutral measure and arbitrage-free pricing of derivative securities are provided. Several numerical examples illustrate no-arbitrage approach to pricing of derivative securities. In the case of incomplete model the Esscher transform is considered to obtain one specific pricing measure. In particular, we show that the Esscher transformed prices are continuously differentiable as a function of the parameters at the interface of incompleteness and completeness.
Author : Svetlana Boyarchenko
Publisher :
ISBN 13 :
Total Pages : 36 pages
Book Rating : 4.:/5 (129 download)
Download or read book American Options in Regime-Switching Models written by Svetlana Boyarchenko and published by . This book was released on 2007 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the paper, we solve the pricing problem for American options in Markov-modulated Levy models. The early exercise boundaries and prices are calculated using a generalization of Carr's randomization for regime-switching models. The pricing procedure is efficient even if the number of states is large provided the transition rates are not large w.r.t. the riskless rates. The payoffs and riskless rates may depend on a state. Special cases are stochastic volatility models and models with stochastic interest rate; both must be modelled as finite-state Markov chains.
Author : Frédéric Godin
Publisher :
ISBN 13 :
Total Pages : 46 pages
Book Rating : 4.:/5 (13 download)
Download or read book Option Pricing Under Regime-Switching Models written by Frédéric Godin and published by . This book was released on 2018 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: Although option pricing schemes in regime-switching frameworks were extensively explored in the literature, many models developed disregard the unobservability of regimes. In such a context, the traditional pricing approach pioneered by Hardy (2001) applied to vanilla options exhibits path-dependence even if the underlying asset price process can be embedded in a Markov process. This property is deemed counterintuitive and puzzling, warranting explanations and alternatives. The current work develops novel risk-neutral measures which remove the path-dependence issue. Pricing approaches based on dynamic programming and Monte-Carlo simulations which rely on the latter measures are illustrated.
Author : Svetlana Boyarchenko
Publisher :
ISBN 13 :
Total Pages : 27 pages
Book Rating : 4.:/5 (129 download)
Download or read book Perpetual American Options in Regime-Switching Models written by Svetlana Boyarchenko and published by . This book was released on 2007 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the paper, we solve the pricing problem for perpetual American options in Markov-modulated Levy models. The early exercise boundaries and prices are calculated using an iteration procedure. The pricing procedure is efficient even if the number of states is large provided the transition rates are not large w.r.t. the riskless rates. The payoffs and riskless rates may depend on a state. Special cases are stochastic volatility models and models with stochastic interest rate; both must be modelled as finite-state Markov chains.
Author : Mohamed Wahab Mohamed Ismail
Publisher :
ISBN 13 : 9780494219584
Total Pages : 238 pages
Book Rating : 4.2/5 (195 download)
Download or read book A Lattice Approach to the Valuation of Multi-variate Contingent Claims with Regime Switching written by Mohamed Wahab Mohamed Ismail and published by . This book was released on 2006 with total page 238 pages. Available in PDF, EPUB and Kindle. Book excerpt: Various investment and operational practices, such as investing in flexible manufacturing systems and writing contracts to hedge the future risks, increasingly require tools for the valuation of contingent claims whose values depend on multiple underlying stochastic variables. These contingent claims incorporate advanced features, such as the early exercise of options, intermediate decisions, optimal policies, and possible causes of the dynamic behavior of the economic and operational environments. It would be impractical to utilize single-regime models, which specify a given mean and volatility to represent the evolution of an underlying variable, to describe the uncertainties from those economic and operational environments. Therefore, regime-switching models, which allow changes in the mean and volatility of the underlying stochastic variables over time, emerge as an alternative approach. Since the current literature on the regime-switching models mainly focuses on modeling and valuing an option on a single stochastic variable, the existing regime-switching models can not be applied to value options on several financial and non-financial regime-switching variables. Those options are complicated and require the development of a lattice approach, which is a discrete representation of a continuous process. Thus, one of the primary goals of this research is to develop a lattice approach that can be applied to value options on multiple underlying stochastic processes with multiple regimes. In this thesis, the existing lattice approach is extended in two major directions: lattice for a single stochastic process with multiple regimes, and lattice for multiple stochastic processes with multiple regimes. We then present three applications for the proposed lattices. The first application prices swing options under price uncertainty. The second application incorporates the product life cycle in valuing the flexibility of a manufacturing system that has three capacity options: expansion, contraction, and switching. The third application prices European and American rainbow options on correlated multiple regime-switching stochastic processes. We show that when compared with the Monte Carlo simulation, the proposed lattice for multiple stochastic processes with multiple regimes is computationally efficient and converged to the actual value of the options within a smaller number of steps.
Author : Qixia Yao
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (93 download)
Download or read book Valuing Real Options Under Regime-switching Models written by Qixia Yao and published by . This book was released on 2002 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Amalia Christoforidou
Publisher :
ISBN 13 :
Total Pages : 93 pages
Book Rating : 4.:/5 (933 download)
Download or read book Regime-switching Option Pricing Models written by Amalia Christoforidou and published by . This book was released on 2015 with total page 93 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Fangcheng Hao
Publisher :
ISBN 13 :
Total Pages : 344 pages
Book Rating : 4.:/5 (779 download)
Download or read book Options Pricing and Risk Measures Under Regime-switching Models written by Fangcheng Hao and published by . This book was released on 2011 with total page 344 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Svetlana Boyarchenko
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (137 download)
Download or read book Pricing American Options in Regime-Switching Models written by Svetlana Boyarchenko and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The pricing problem for American options in Markov-modulated Lévy models is solved. The early exercise boundaries and prices are calculated using a generalization of Carr's randomization procedure for regime-switching models. The pricing procedure is efficient even if the number of states is large provided the transition rates are not large w.r.t. the riskless rates. The payoffs and riskless rates may depend on a state. Special cases are stochastic volatility models and models with stochastic interest rate; both must be modeled as finite-state Markov chains. In contrast with the earlier version of the method, an explicit algorithm is formulated for wide classes of Lévy processes, and FFT and iFFT are used.
Author : Chao Qiu
Publisher :
ISBN 13 :
Total Pages : 181 pages
Book Rating : 4.:/5 (86 download)
Download or read book Option Pricing and Hedging Analysis Under Regime-switching Models written by Chao Qiu and published by . This book was released on 2013 with total page 181 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis explores option pricing and hedging in a discrete time regime-switching environment. If the regime risk cannot be hedged away, then we cannot ignore this risk and use the Black-Scholes pricing and hedging framework to generate a unique pricing and hedging measure. We develop a risk neutral pricing measure by applying an Esscher Transform to the real world asset price process, with the focus on the issue of incompleteness of the market. The Esscher transform turns out to be a convenient and effective tool for option pricing under the discrete time regime switching models. We apply the pricing measure to both single variate European options and multivariate options. To better understand the effect of the pricing method, we also compared the results with those generated from two other risk neutral methods: the Black-Scholes model, and the natural equivalent martingale method. We further investigate the difference in hedging associated with different pricing measures. This is of interest when the choice of pricing method is uncertain under regime switching models. We compare four hedging strategies: delta hedging for the three risk neutral pricing methods under study, and mean variance hedging. We also develop a more general tool of tail ordering for hedging analysis in a general incomplete market with the uncertainty of the risk neutral measures. As a result of the analysis, we propose that pricing and hedging using the Esscher transform may be an effective strategy for a market where the regime switching process brings uncertainty.
Author : Fangcheng Hao
Publisher :
ISBN 13 : 9781361267776
Total Pages : pages
Book Rating : 4.2/5 (677 download)
Download or read book Options Pricing and Risk Measures Under Regime-Switching Models written by Fangcheng Hao and published by . This book was released on 2017-01-26 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation, "Options Pricing and Risk Measures Under Regime-switching Models" by Fangcheng, Hao, 郝方程, was obtained from The University of Hong Kong (Pokfulam, Hong Kong) and is being sold pursuant to Creative Commons: Attribution 3.0 Hong Kong License. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation. All rights not granted by the above license are retained by the author. DOI: 10.5353/th_b4714726 Subjects: Stock options - Prices - Mathematical models Risk management - Mathematical models
Author : Mohammad Yousef Akhavein Sohrabi
Publisher :
ISBN 13 :
Total Pages : 83 pages
Book Rating : 4.:/5 (827 download)
Download or read book Option Pricing Under Regime Switching (analytical, PDE, and FFT Methods) written by Mohammad Yousef Akhavein Sohrabi and published by . This book was released on 2011 with total page 83 pages. Available in PDF, EPUB and Kindle. Book excerpt: Although globally used in option pricing, the Black-Scholes model has not been able to reflect the evolution of stocks in the real world. A regime-switching model which allows jumps in the underlying asset prices and the parameters of the corresponding stochastic process is more accurate. We evaluate the analytical solution for pricing of European options under a two-state regime switching model. Both the convergence of the analytical solution and the feature of implied volatility are investigated through numerical examples.
