Highly Influenced

# Markov-Modulated Models for Derivatives Pricing

@inproceedings{McKinlay2009MarkovModulatedMF, title={Markov-Modulated Models for Derivatives Pricing}, author={Shaun McKinlay}, year={2009} }

- Published 2009

The aim of this thesis is to investigate the mathematics of Markov-modulated models for derivatives pricing. We consider a model where instantaneous stock volatility and drift are driven by a continuous time finite Markov chain. We present a new derivation of an integral representation for attainable non-path dependent options’ prices in a twostate and three-state Markov chain model, and compute three of the Greeks in a two-state model. We find that occupation time distributions of Markov… CONTINUE READING