Adelaide Research & Scholarship
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https://hdl.handle.net/2440/96121
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| Type: | Journal article |
| Title: | A Dupire equation for a regime-switching model |
| Author: | Elliott, R. Chan, L. Siu, T. |
| Citation: | International Journal of Theoretical and Applied Finance, 2015; 18(4):1550023-1-1550023-13 |
| Publisher: | World Scientific Publishing |
| Issue Date: | 2015 |
| ISSN: | 0219-0249 1793-6322 |
| Statement of Responsibility: | 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 |
| DOI: | 10.1142/S0219024915500235 |
| Appears in Collections: | Aurora harvest 3 Mathematical Sciences publications |
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