On pricing and hedging options in regime-switching models with feedback effect
type: Item
instance of: scholarly article
title: On pricing and hedging options in regime-switching models with feedback effect
zbMATH Open document ID: 1209.91156
author: Robert J. Elliott
author: Tak Kuen Siu
author: Alexandru Badescu
publication date: 2011-03-31T00:00:00Z
review text: The goal of the paper is to study the continuous time market consisting of two assets. One is modelling the bank account (B), second the risky asset (S). The authors assume that the dynamics of both the balance of B and price of S depend on finite state chain \(X\). Namely, \(X\) is influencing the interest rate of B and the coefficients of the diffusion process describing the price of S. Moreover the changes of states of \(X\) are inducing jumps of the price of S. On the other hand the price of S is modulating the intensity of the transition of \(X\) from one state to another. For such a market as above one the authors discuss the pricing and hedging of European style options.
reviewed by: Piotr Jaworski
Mathematics Subject Classification ID: 91G20
Mathematics Subject Classification ID: 60G48
Mathematics Subject Classification ID: 60H30
zbMATH DE Number: 5872820
zbMATH Keywords: pricing and hedging
zbMATH Keywords: regime-switching
zbMATH Keywords: feedback effect
zbMATH Keywords: product price kernel
zbMATH Keywords: local risk-minimization
MaRDI profile type: Publication
full work available at URL: j.jedc.2010.12.014
OpenAlex ID: W2003153994
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DOI: 10.1016/J.JEDC.2010.12.014
published in: Journal of Economic Dynamics and Control
description: scientific article; zbMATH DE number 5872820