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|Title:||A Dupire equation for a regime-switching model|
|Citation:||International Journal of Theoretical and Applied Finance, 2015; 18(4):1550023-1-1550023-13|
|Publisher:||World Scientific Publishing|
|Robert J. Elliott, Leunglung Chan, Tak Kuen Siu|
|Abstract:||A forward equation, which is also called the Dupire formula, is obtained for European call options when the price dynamics of the underlying risky assets are assumed to follow a regime-switching local volatility model. Using a regime-switching version of the adjoint formula, a system of coupled forward equations is derived for the price of the European call over different states of the economy.|
|Keywords:||Regime-switching local volatility model; Esscher transform; forward equations; regime-switching adjoint formula|
|Rights:||© World Scientific Publishing Company|
|Appears in Collections:||Aurora harvest 3|
Mathematical Sciences publications
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