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Article: Option pricing with regime switching by trinomial tree method

TitleOption pricing with regime switching by trinomial tree method
Authors
KeywordsExotic options
Hedging risk of regime switching
Option pricing
Regime switching
Trinomial method
Issue Date2010
PublisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/cam
Citation
Journal Of Computational And Applied Mathematics, 2010, v. 233 n. 8, p. 1821-1833 How to Cite?
AbstractWe present a fast and simple tree model to price simple and exotic options in Markov Regime Switching Model (MRSM) with multi-regime. We modify the trinomial tree model of Boyle (1986) [12] by controlling the risk neutral probability measure in different regime states to ensure that the tree model can accommodate the data of all different regimes at the same time preserving its combining tree structure. In MRSM, the market might not be complete, therefore we provide some ideas and discussions on managing the regime switching risk in support of our results. © 2009 Elsevier B.V. All rights reserved.
Persistent Identifierhttp://hdl.handle.net/10722/124160
ISSN
2015 Impact Factor: 1.328
2015 SCImago Journal Rankings: 1.089
ISI Accession Number ID
Funding AgencyGrant Number
Hong Kong Special Administrative Region, China7062/09P
Funding Information:

This research was supported by the Research Grants Council of the Hong Kong Special Administrative Region, China (Project No. 7062/09P).

References

 

DC FieldValueLanguage
dc.contributor.authorYuen, FLen_HK
dc.contributor.authorYang, Hen_HK
dc.date.accessioned2010-10-28T07:32:07Z-
dc.date.available2010-10-28T07:32:07Z-
dc.date.issued2010en_HK
dc.identifier.citationJournal Of Computational And Applied Mathematics, 2010, v. 233 n. 8, p. 1821-1833en_HK
dc.identifier.issn0377-0427en_HK
dc.identifier.urihttp://hdl.handle.net/10722/124160-
dc.description.abstractWe present a fast and simple tree model to price simple and exotic options in Markov Regime Switching Model (MRSM) with multi-regime. We modify the trinomial tree model of Boyle (1986) [12] by controlling the risk neutral probability measure in different regime states to ensure that the tree model can accommodate the data of all different regimes at the same time preserving its combining tree structure. In MRSM, the market might not be complete, therefore we provide some ideas and discussions on managing the regime switching risk in support of our results. © 2009 Elsevier B.V. All rights reserved.en_HK
dc.languageeng-
dc.publisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/camen_HK
dc.relation.ispartofJournal of Computational and Applied Mathematicsen_HK
dc.rightsJournal of Computational and Applied Mathematics. Copyright © Elsevier BV.-
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.subjectExotic optionsen_HK
dc.subjectHedging risk of regime switchingen_HK
dc.subjectOption pricingen_HK
dc.subjectRegime switchingen_HK
dc.subjectTrinomial methoden_HK
dc.titleOption pricing with regime switching by trinomial tree methoden_HK
dc.typeArticleen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=0377-0427&volume=233&issue=8&spage=1821&epage=1833&date=2010&atitle=Option+pricing+with+regime+switching+by+trinomial+tree+method-
dc.identifier.emailYang, H: hlyang@hku.hken_HK
dc.identifier.authorityYang, H=rp00826en_HK
dc.description.naturepostprint-
dc.identifier.doi10.1016/j.cam.2009.09.019en_HK
dc.identifier.scopuseid_2-s2.0-70450284562en_HK
dc.identifier.hkuros173058-
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-70450284562&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume233en_HK
dc.identifier.issue8en_HK
dc.identifier.spage1821en_HK
dc.identifier.epage1833en_HK
dc.identifier.isiWOS:000273250300011-
dc.publisher.placeNetherlandsen_HK
dc.identifier.scopusauthoridYuen, FL=35073271000en_HK
dc.identifier.scopusauthoridYang, H=7406559537en_HK
dc.identifier.citeulike5842888-

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