Power Penalty Approach to American Options Pricing Under Regime Switching

2018 ◽  
Vol 179 (1) ◽  
pp. 311-331 ◽  
Author(s):  
Kai Zhang ◽  
Xiaoqi Yang
Keyword(s):  
Regime Switching ◽  
American Options ◽  
Options Pricing ◽  
Power Penalty ◽  
Penalty Approach

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.

A Forward Monte Carlo Method for American Options Pricing

2012 ◽  
Vol 33 (4) ◽  
pp. 369-395 ◽  
Author(s):  
Daniel Wei-Chung Miao ◽  
Yung-Hsin Lee
Keyword(s):  
Monte Carlo ◽  
Monte Carlo Method ◽  
American Options ◽  
Options Pricing
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