Characteristic functions and option valuation in a Markov chain market
Date
2011
Journal Title
Journal ISSN
Volume Title
Publisher
Elsevier
Abstract
We introduce an approach for valuing some path-dependent options in a discrete-time Markov chain market based on the characteristic function of a vector of occupation times of the chain. A pricing kernel is introduced and analytical formulas for the prices of Asian options and occupation time call options are derived.
Description
Article deposited according to publisher policy posted on SHERPA/ROMEO, June 13, 2012
Keywords
Markov chain market, Occupation times
Citation
Robert J. Elliott, Chuin Ching Liew, Tak Kuen Siu, Characteristic functions and option valuation in a Markov chain market, Computers & Mathematics with Applications, Volume 62, Issue 1, July 2011, Pages 65-74