Option Pricing With Markov-Modulated Dynamics

  title={Option Pricing With Markov-Modulated Dynamics},
  author={A. Jobert and L. C. G. Rogers},
  journal={SIAM J. Control and Optimization},
Markov-modulated models for equity prices have recently been extensively studied in the literature. In this paper, we apply some old results on the Wiener–Hopf factorization of Markov processes to a range of option-pricing problems for such models. The first example is the perpetual American put, where the exact (numerical) solution is obtained without discretizing any PDE. We then show how the methodology of Rogers and Stapleton [Finance Stoch., 2 (1997), pp. 3–17] can be used to tackle finite… CONTINUE READING

From This Paper

Figures, tables, and topics from this paper.


Publications referenced by this paper.
Showing 1-10 of 26 references

Pricing options with curved boundaries

  • N. Kunitomo, M. Ikeda
  • Math. Finance, 2
  • 1992
Highly Influential
4 Excerpts

Valuing moving barrier options

  • L.C.G. Rogers, O. Zane
  • J. Computational Finance, 1
  • 1997
Highly Influential
2 Excerpts

American options with regime switching

  • J. Buffington, R. J. Elliott
  • Internat. J. Theoret. Appl. Finance, 5
  • 2002
3 Excerpts

Similar Papers

Loading similar papers…