An Exact Formula for Pricing American Exchange Options with Regime Switching
作者： Leunglung Chan
DOI: 10.1007/978-1-4899-7442-6_9
关键词: Unobservable 、 Geometric Brownian motion 、 Economics 、 Regime switching 、 Exact formula 、 Hidden markov process 、 Volatility (finance) 、 Mathematical economics
摘要: This paper investigates the pricing of American exchange options when price dynamics each underlying risky asset are assumed to follow a Markov-modulated Geometric Brownian motion; that is, appreciation rate and volatility depend on unobservable states economy described by continuous-time hidden Markov process. We show an option can be reduced option. Then, we modify result Zhu Chan (An analytic formula for with regime switching. Submitted publication, 2012), closed-form analytical is given.
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