Artikel
Volterra equation for pricing and hedging in a regime switching market
It is known that the risk minimizing price of European options in Markovmodulated market satisfies a system of coupled PDE, known as generalized B-S-M PDE. In this paper, another system of equations, which can be categorized as a Volterra integral equations of second kind, are considered. It is shown that this system of integral equations has smooth solution and the solution solves the generalized B-S-M PDE. Apart from showing existence and uniqueness of the PDE, this IE representation helps to develop a new computational method. It enables to compute the European option price and corresponding optimal hedging strategy by using quadrature method.
- Sprache
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Englisch
- Erschienen in
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Journal: Cogent Economics & Finance ; ISSN: 2332-2039 ; Volume: 2 ; Year: 2014 ; Issue: 1 ; Pages: 1-11 ; Abingdon: Taylor & Francis
- Klassifikation
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Wirtschaft
- Thema
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Markov modulated market
locally risk minimizing option price
Black-Scholes-Merton equations
Volterra equation
quadrature method
- Ereignis
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Geistige Schöpfung
- (wer)
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Goswami, Anindya
Saini, Ravi Kant
- Ereignis
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Veröffentlichung
- (wer)
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Taylor & Francis
- (wo)
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Abingdon
- (wann)
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2014
- DOI
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doi:10.1080/23322039.2014.939769
- Handle
- Letzte Aktualisierung
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10.03.2025, 11:44 MEZ
Datenpartner
Dieses Objekt wird bereitgestellt von:
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Objekttyp
- Artikel
Beteiligte
- Goswami, Anindya
- Saini, Ravi Kant
- Taylor & Francis
Entstanden
- 2014
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