An exact and explicit formula for pricing Asian options with regime switching
Pricing of Securities
2014-07-22 v1
Abstract
This paper studies the pricing of European-style Asian options when the price dynamics of the underlying risky asset are assumed to follow a Markov- modulated geometric Brownian motion; that is, the appreciation rate and the volatility of the underlying risky asset depend on unobservable states of the economy described by a continuous-time hidden Markov process. We derive the exact, explicit and closed-form solutions for European-style Asian options in a two-state regime switching model.
Keywords
Cite
@article{arxiv.1407.5091,
title = {An exact and explicit formula for pricing Asian options with regime switching},
author = {Leunglung Chan and Song-Ping Zhu},
journal= {arXiv preprint arXiv:1407.5091},
year = {2014}
}
Comments
arXiv admin note: substantial text overlap with arXiv:1407.4864