| Article ID | Journal | Published Year | Pages | File Type |
|---|---|---|---|---|
| 1142762 | Operations Research Letters | 2009 | 5 Pages |
Abstract
We address asymptotic analysis of option pricing in a regime switching market where the risk free interest rate, growth rate and the volatility of the stocks depend on a finite state Markov chain. We study two variations of the chain namely, when the chain is moving very fast compared to the underlying asset price and when it is moving very slow. Using quadratic hedging and asymptotic expansion, we derive corrections on the locally risk minimizing option price.
Related Topics
Physical Sciences and Engineering
Mathematics
Discrete Mathematics and Combinatorics
Authors
Arnab Basu, Mrinal K. Ghosh,