Risk-minimizing option pricing under a Markov-modulated jump-diffusion model with stochastic volatility

详细信息    查看全文

• 作者：Xiaonan Su ; Wensheng Wang ; Kyo-Shin Hwang
• 关键词：Regime switching ; Jump-diffusion processes ; Stochastic volatility ; Local risk minimization ; Option pricing
• 刊名：Statistics and Probability Letters
• 出版年：2012
• 出版时间：October, 2012
• 年：2012
• 卷：82
• 期：10
• 页码：1777-1785
• 全文大小：240 K

文摘

In this paper, we deal with the pricing of European style options when the dynamics of the risky underlying asset are driven by a Markov-modulated jump diffusion with stochastic volatility. We investigate the Radon-Nikodym derivative for the minimal martingale measure and a partial differential equation approach for pricing European options. An optimal hedging strategy in terms of local risk minimization is obtained.