Option pricing model based on a Markov-modulated diffusion with jumps

Nikita Ratanov

Resultado de la investigación: Contribución a una revistaArtículorevisión exhaustiva

17 Citas (Scopus)

Resumen

The paper proposes a class of financial market models which are based on inhomogeneous telegraph processes and jump diffusions with alternating volatilities. It is assumed that the jumps occur when the tendencies and volatilities are switching. Such a model captures well the stock price dynamics under periodic financial cycles. The distribution of this process is described in detail.We also provide a closed form of the structure of risk-neutral measures. This incomplete model can be completed by adding another asset based on the same sources of randomness. For completed market model we obtain explicit formulae for call prices.

Idioma originalInglés estadounidense
Páginas (desde-hasta)413-431
Número de páginas19
PublicaciónBrazilian Journal of Probability and Statistics
Volumen24
N.º2
DOI
EstadoPublicada - 2010

All Science Journal Classification (ASJC) codes

  • Estadística y probabilidad

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