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https://hdl.handle.net/2440/71767
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Type: | Journal article |
Title: | A risk-based approach for pricing American options under a generalized Markov regime-switching model |
Author: | Elliott, R. Siu, T. |
Citation: | Quantitative Finance, 2011; 11(11):1633-1646 |
Publisher: | IOP Publishing Ltd. |
Issue Date: | 2011 |
ISSN: | 1469-7688 1469-7696 |
Statement of Responsibility: | Robert J. Elliott & Tak Kuen Siu |
Abstract: | This paper considers a risk-based approach for pricing an American contingent claim in an incomplete market described by a continuous-time, Markov, regime-switching jump-diffusion model. We formulate the valuation problem as a stochastic differential game and use dynamic programming. Verification theorems for the Hamilton–Jacobi–Bellman–Issacs (HJBI) variational inequalities of the games are used to determine the seller's and buyer's prices and optimal exercise strategies. |
Keywords: | American contingent claims Convex risk measure Economic risk Financial risk HJBI variational inequalities Risk-based pricing Stochastic differential game |
Rights: | © 2011 Taylor and Francis Group, LLC. |
DOI: | 10.1080/14697688.2011.615215 |
Grant ID: | http://purl.org/au-research/grants/arc/DP1096243 |
Published version: | http://dx.doi.org/10.1080/14697688.2011.615215 |
Appears in Collections: | Aurora harvest 5 Mathematical Sciences publications |
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