British Put Option On Stocks Under Regime-Switching Model

IF 1 Q1 MATHEMATICS
Felipe Jr Raypan Sumalpong, M. Frondoza, N. L. Sayson
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引用次数: 0

Abstract

In a plain vanilla option, its holder is given the right, but not the obligation, to buy or sell the underlying stock at a specified price (strike price) at a predetermined date. If the exercise date is at maturity, the option is called a European; if the option is exercised anytime prior to maturity, it is called an American. In a British option, the holder can enjoy the early exercise feature of American option whereupon his payoff is the ‘best prediction’ of the European payoff given all the information up to exercise date under the hypothesis that the true drift of the stock equals a specified contract drift. In this paper, in contrast to the constant interest rate and constant volatility assumptions, we consider the British option by assuming that the economic state of the world is described by a finite state continuous-time Markov chain. Also, we provide a solution to a free boundary problem by using PDE arguments. However, closed form expression for the arbitrage-free price are not available in our setting.
制度转换模式下的英国股票看跌期权
在普通期权中,其持有人有权但没有义务在预定日期以特定价格(执行价)买卖标的股票。如果行权日期到期,则期权被称为欧式期权;如果期权在到期前的任何时候行使,它就被称为美国人。在英国期权中,持有人可以享受美国期权的早期行权特征,因此,在假设股票的真实漂移等于特定的合同漂移的情况下,考虑到截至行权日期的所有信息,他的回报是对欧洲回报的“最佳预测”。在本文中,与恒定利率和恒定波动率的假设相反,我们通过假设世界的经济状态由有限状态连续时间马尔可夫链描述来考虑英国期权。此外,我们还通过使用PDE参数提供了自由边界问题的解决方案。然而,无套利价格的封闭形式表达式在我们的环境中是不可用的。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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来源期刊
CiteScore
1.30
自引率
28.60%
发文量
156
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