Name
Abstract | ||
|---|---|---|
We consider the valuation of both European-style and American-style barrier options in a Markovian, regime-switching, Black-Scholes-Merton economy, where the price process of an underlying risky asset is governed by a Markovian, regime-switching, geometric Brownian motion. Both the probabilistic and partial differential equation (PDE), approaches are used to price the barrier options. For the probabilistic approach to value a European-style barrier option, we employ the fundamental matrix solution and the Fourier transform space to derive a (semi)-analytical solution. The PDE approach is employed to value an American barrier option, where we obtain a system of free-boundary, coupled PDEs and an analytical quadratic approximation to the price by solving the free-boundary problem. |
Year | DOI | Venue |
|---|---|---|
2014 | 10.1016/j.cam.2013.07.034 | J. Computational Applied Mathematics |
Keywords | Field | DocType |
regime switching,pricing barrier option,analytical quadratic approximation,price process,european-style barrier option,analytical solution,free-boundary problem,pde approach,barrier option,american barrier option,fundamental matrix solution,american-style barrier option,free boundary problem | Mathematical optimization,Markov process,Mathematical analysis,Quadratic equation,Free boundary problem,Probabilistic logic,Partial differential equation,Barrier option,Valuation (finance),Geometric Brownian motion,Mathematics | Journal |
Volume | ISSN | Citations |
256, | 0377-0427 | 0 |
PageRank | References | Authors |
0.34 | 1 | 3 |
Name | Order | Citations | PageRank |
|---|---|---|---|
| Robert J. Elliott | 1 | 333 | 50.13 |
| Tak Kuen Siu | 2 | 114 | 20.25 |
| Leunglung Chan | 3 | 2 | 1.47 |