American option prices in a Markov chain market model
Identifieur interne : 001174 ( Istex/Corpus ); précédent : 001173; suivant : 001175American option prices in a Markov chain market model
Auteurs : John Van Der Hoek ; Robert J. ElliottSource :
- Applied Stochastic Models in Business and Industry [ 1524-1904 ] ; 2012-01.
English descriptors
Abstract
This paper is a sequel to our previous paper ‘A New Paradigm in Asset Pricing’ in which we construct a model for asset pricing in a world where the randomness is modeled by a Markov chain. In this paper we develop a theory of optimal stopping and related variational inequalities for American options in this model. A version of Saigal's Lemma is established and numerical results obtained. Copyright © 2011 John Wiley & Sons, Ltd.
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DOI: 10.1002/asmb.893
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