Pricing foreign equity options with regime-switching

Fan, Kun; Shen, Yang; Siu, Tak Kuen; Wang, Rongming

doi:10.1016/j.econmod.2013.11.009

Cited by 29 publications

(15 citation statements)

References 24 publications

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“…It resembles to Theorem 1 in Shen et al (2014), (see also Proposition 3.1 in Fan et al, 2014 andTheorem 4.1 in Shen andSiu, 2013a). − e k ) is given by l=1,2,...,N given by…”

Section: Valuation Of Point-to-point Eiasmentioning

confidence: 90%

Pricing annuity guarantees under a double regime-switching model

Fan

Shen

Siu

et al. 2015

Insurance: Mathematics and Economics

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“…It resembles to Theorem 1 in Shen et al (2014), (see also Proposition 3.1 in Fan et al, 2014 andTheorem 4.1 in Shen andSiu, 2013a). − e k ) is given by l=1,2,...,N given by…”

Section: Valuation Of Point-to-point Eiasmentioning

confidence: 90%

Pricing annuity guarantees under a double regime-switching model

Fan

Shen

Siu

et al. 2015

Insurance: Mathematics and Economics

Self Cite

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“…Kwok and Wong [15] first derived the pricing formulas of different foreign equity options under the Black-Scholes model. Since the study of [15], there have been the extended results under various extensions of the Black-Scholes model, such as the Lévy process [16], stochastic volatility [17,18], regime switching [19] and jump diffusion [20,21]. However, there have been no studies on foreign equity options with credit risk.…”

Section: Introductionmentioning

confidence: 99%

Closed-form pricing formula for foreign equity option with credit risk

2021

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Since credit risk in the over-the-counter (OTC) market has undoubtedly become very important issue, credit risk has to be considered when the options in the OTC market are priced. In this paper, we consider the valuation of foreign equity options with credit risk. In order to derive a closed-form pricing formula of this option, we adopt the partial differential equation (PDE) approach and use the Mellin transform method to solve the PDE. Specifically, triple Mellin transforms are used, and the pricing formula is presented as 3-dimensional normal cumulative distribution functions. Finally, we verify that our closed-form formula is accurate by comparing it with the numerical result from the Monte-Carlo simulation.

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“…Various authors assumed regime switching models and addressed theoretical option pricing and portfolio optimization problems following Di Masi et al (1995). For details, the readers may refer to Basak et al (2011), Bo et al (2010), Fan et al (2014), Jobert and Rogers (2006), Li and Ma (2013), Lian et al (2016), Papin and Turinici (2014), Siu et al (2008), Su et al (2012), Swishchuk et al (2014), Wang et al (2016) and Yuen and Yang (2009). This list is merely indicative and not exhaustive by any means.…”

Section: Introductionmentioning

confidence: 99%

Testing of binary regime switching models using squeeze duration analysis

Das

Goswami

2019

J. Finan. Eng.

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We have developed a statistical technique to test the model assumption of binary regime switching extension of the geometric Brownian motion (GBM) model by proposing a new discriminating statistics. Given a time series data, we have identified an admissible class of the regime switching candidate models for the statistical inference. By performing several systematic experiments, we have successfully shown that the sampling distribution of the test statistics differs drastically, if the model assumption changes from GBM to Markov modulated GBM, or to semi-Markov modulated GBM. Furthermore, we have implemented this statistics for testing the regime switching hypothesis with Indian sectoral indices.

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Pricing foreign equity options with regime-switching

Cited by 29 publications

References 24 publications

Pricing annuity guarantees under a double regime-switching model

Pricing annuity guarantees under a double regime-switching model

Closed-form pricing formula for foreign equity option with credit risk

Testing of binary regime switching models using squeeze duration analysis

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