Option valuation under a regime-switching constant elasticity of variance process

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摘要

We investigate the pricing of both European and American-style options when the price dynamics of the underlying risky assets are governed by a Markov-modulated constant elasticity of variance process. Both probabilistic and partial differential equation approaches are considered in deriving the value of a European-style option. For the case of an American-style option, we consider a probabilistic approach and derive an integral representation for the early exercise premium.

论文关键词:Option pricing,CEV models,Regime switching,Time-changed Bessel processes,Early exercise premiums

论文评审过程:Available online 12 November 2012.

论文官网地址:https://doi.org/10.1016/j.amc.2012.10.047