Corpus ID: 158285572

Option Pricing in a Regime Switching Jump Diffusion Model

  title={Option Pricing in a Regime Switching Jump Diffusion Model},
  author={Anindya Goswami and Omkar Manjarekar and R. Anjana},
  journal={arXiv: Pricing of Securities},
  • Anindya Goswami, Omkar Manjarekar, R. Anjana
  • Published 2018
  • Economics, Mathematics
  • arXiv: Pricing of Securities
  • This paper presents the solution to a European option pricing problem by considering a regime-switching jump diffusion model of the underlying financial asset price dynamics. The regimes are assumed to be the results of an observed pure jump process, driving the values of interest rate and volatility coefficient. The pure jump process is assumed to be a semi-Markov process on finite state space. This consideration helps to incorporate a specific type of memory influence in the asset price… CONTINUE READING
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