A general continuous time Markov chain approximation for multi-asset option pricing with systems of correlated diffusions

DOI10.1016/j.amc.2020.125472zbMath1461.91314OpenAlexW3037230752MaRDI QIDQ2656684

Yanyan Li

Publication date: 16 March 2021

Published in: Applied Mathematics and Computation (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1016/j.amc.2020.125472

zbMATH Keywords

PDEdiffusionMarkov chainbasket optionsspread optionsexotic optionrainbow optionsoptions pricingCTMCmulti asset

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) PDEs in connection with game theory, economics, social and behavioral sciences (35Q91) Applications of continuous-time Markov processes on discrete state spaces (60J28)

Related Items (9)

Markov chain approximation and measure change for time-inhomogeneous stochastic processes ⋮ Analytical and numerical solutions to ergodic control problems arising in environmental management ⋮ Finite-time expected present value of operating costs until ruin in a Cox risk model with periodic observation ⋮ Efficient simulation of generalized SABR and stochastic local volatility models based on Markov chain approximations ⋮ Maximum likelihood estimation of diffusions by continuous time Markov chain ⋮ Pricing of spread and exchange options in a rough jump-diffusion market ⋮ Two-factor Heston model equipped with regime-switching: American option pricing and model calibration by Levenberg-Marquardt optimization algorithm ⋮ Hybrid equity swap, cap, and floor pricing under stochastic interest by Markov chain approximation ⋮ Simulation of multidimensional diffusions with sticky boundaries via Markov chain approximation

Uses Software

• BENCHOP

Cites Work

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