Asset Pricing in a Semi-Markov Modulated Market with Time-dependent Volatility
Mathematical Finance
2016-09-19 v1
Abstract
This project attempts to address the problem of asset pricing in a financial market, where the interest rates and volatilities exhibit regime switching. This is an extension of the Black-Scholes model. Studies of Markov-modulated regime switching models have been well-documented. This project extends that notion to a class of semi-Markov processes known as age-dependent processes. We also allow for time-dependence in volatility within regimes. We show that the problem of option pricing in such a market is equivalent to solving a certain integral equation.
Keywords
Cite
@article{arxiv.1609.04907,
title = {Asset Pricing in a Semi-Markov Modulated Market with Time-dependent Volatility},
author = {Tanmay S. Patankar},
journal= {arXiv preprint arXiv:1609.04907},
year = {2016}
}
Comments
78 pages, 2 figures. MS thesis. arXiv admin note: substantial text overlap with arXiv:1408.5266, arXiv:1506.01467 by other authors