Partial differential integral equation model for pricing American option under multi state regime switching with jumps

2021 ◽  
Author(s):  
Muhammad Yousuf ◽  
Abdul Q. M. Khaliq
Keyword(s):  
Integral Equation ◽  
Regime Switching ◽  
Equation Model ◽  
American Option ◽  
Partial Differential ◽  
Differential Integral Equation ◽  
State Regime

Solving complex PIDE systems for pricing American option under multi-state regime switching jump–diffusion model

2018 ◽  
Vol 75 (8) ◽  
pp. 2989-3001 ◽  
Author(s):  
M. Yousuf ◽  
A.Q.M. Khaliq ◽  
Salah Alrabeei
Keyword(s):  
Diffusion Model ◽  
Regime Switching ◽  
Jump Diffusion ◽  
American Option ◽  
State Regime ◽  
Jump Diffusion Model

scholarly journals An Analytic Approach for Pricing American Options with Regime Switching

2021 ◽  
Vol 14 (5) ◽  
pp. 188
Author(s):  
Leunglung Chan ◽  
Song-Ping Zhu
Keyword(s):  
Regime Switching ◽  
American Options ◽  
Option Price ◽  
Switching Model ◽  
Homotopy Analysis ◽  
State Regime ◽  
Markov Modulated ◽  
Appreciation Rate ◽  
The Interest Rate ◽  
Hidden States

This paper investigates the American option price in a two-state regime-switching model. The dynamics of underlying are driven by a Markov-modulated Geometric Wiener process. That means the interest rate, the appreciation rate, and the volatility of underlying rely on hidden states of the economy which can be interpreted in terms of Markov chains. By means of the homotopy analysis method, an explicit formula for pricing two-state regime-switching American options is presented.

ESTIMATES FOR APPROXIMATE SOLUTIONS TO A FUNCTIONAL DIFFERENTIAL EQUATION MODEL OF CELL DIVISION

2021 ◽  
pp. 1-20
Author(s):  
STEPHEN TAYLOR ◽  
XUESHAN YANG
Keyword(s):  
Differential Equation ◽  
Partial Differential Equation ◽  
Cell Division ◽  
Nonnegative Function ◽  
Approximate Solutions ◽  
Equation Model ◽  
Order Partial Differential Equation ◽  
Partial Differential ◽  
First Order ◽  
Functional Differential

Abstract The functional partial differential equation (FPDE) for cell division, $$ \begin{align*} &\frac{\partial}{\partial t}n(x,t) +\frac{\partial}{\partial x}(g(x,t)n(x,t))\\ &\quad = -(b(x,t)+\mu(x,t))n(x,t)+b(\alpha x,t)\alpha n(\alpha x,t)+b(\beta x,t)\beta n(\beta x,t), \end{align*} $$ is not amenable to analytical solution techniques, despite being closely related to the first-order partial differential equation (PDE) $$ \begin{align*} \frac{\partial}{\partial t}n(x,t) +\frac{\partial}{\partial x}(g(x,t)n(x,t)) = -(b(x,t)+\mu(x,t))n(x,t)+F(x,t), \end{align*} $$ which, with known $F(x,t)$ , can be solved by the method of characteristics. The difficulty is due to the advanced functional terms $n(\alpha x,t)$ and $n(\beta x,t)$ , where $\beta \ge 2 \ge \alpha \ge 1$ , which arise because cells of size x are created when cells of size $\alpha x$ and $\beta x$ divide. The nonnegative function, $n(x,t)$ , denotes the density of cells at time t with respect to cell size x. The functions $g(x,t)$ , $b(x,t)$ and $\mu (x,t)$ are, respectively, the growth rate, splitting rate and death rate of cells of size x. The total number of cells, $\int _{0}^{\infty }n(x,t)\,dx$ , coincides with the $L^1$ norm of n. The goal of this paper is to find estimates in $L^1$ (and, with some restrictions, $L^p$ for $p>1$ ) for a sequence of approximate solutions to the FPDE that are generated by solving the first-order PDE. Our goal is to provide a framework for the analysis and computation of such FPDEs, and we give examples of such computations at the end of the paper.

Finite maturity American-style stock loans with regime-switching volatility

2021 ◽  
Vol 63 ◽  
pp. 163-177
Author(s):  
Xiaoping Lu ◽  
Endah R. M. Putri
Keyword(s):  
Regime Switching ◽  
Numerical Experiments ◽  
State Regime ◽  
Volatility Regimes ◽  
American Style

We study finite maturity American-style stock loans under a two-state regime-switching economy. We present a thorough semi-analytic discussion of the optimal redeeming prices, the values and the fair service fees of the stock loans, under the assumption that the volatility of the underlying is in a state of uncertainty. Numerical experiments are carried out to show the effects of the volatility regimes and other loan parameters. doi:10.1017/S1446181121000250

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