scholarly journals Properties of American options under a Markovian Regime Switching Model

2021 ◽  
pp. 1-17
Author(s):  
Marko Dimitrov ◽  
Lu Jin ◽  
Ying Ni
Keyword(s):  
Regime Switching ◽  
American Options ◽  
Regime Switching Model ◽  
Switching Model ◽  
Markovian Regime Switching ◽  
Markovian Regime

ATTAINABLE CONTINGENT CLAIMS IN A MARKOVIAN REGIME-SWITCHING MARKET

2012 ◽  
Vol 15 (08) ◽  
pp. 1250055 ◽  
Author(s):  
ROBERT J. ELLIOTT ◽  
TAK KUEN SIU
Keyword(s):  
Regime Switching ◽  
Contingent Claims ◽  
Share Price ◽  
Regime Switching Model ◽  
Martingale Representation ◽  
Switching Model ◽  
Representation Result ◽  
Markovian Regime Switching ◽  
Coupon Bond ◽  
Markovian Regime

It is known that the market in a Markovian regime-switching model is, in general, incomplete, so not all contingent claims can be perfectly hedged. We show, in this paper, how certain contingent claims are attainable in the regime-switching market using a money market account, a share and a zero-coupon bond. General contingent claims with payoffs depending on both the share price and the state of the regime-switching process are considered. We apply a martingale representation result to show the attainability of a European-style contingent claim. We also extend our analysis to Asian-style and American-style contingent claims.

Sign in / Sign up

Export Citation Format

Share Document