Deshpande, Amogh and Ghosh, Mrinal K (2008) Risk Minimizing Option Pricing in a Regime Switching Market. In: Stochastic Analysis and Applications, 26 (2). 313 -324.
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We study option pricing in a regime switching market where the risk free interest rate, growth rate and the volatility of a stock depends on a finite state Markov chain. Using a minimal martingale measure we show that the risk minimizing option price satisfies a system of Black-Scholes partial differential equations with weak coupling.
| Item Type: | Journal Article |
|---|---|
| Publication: | Stochastic Analysis and Applications |
| Publisher: | Taylor & Francis Group |
| Additional Information: | Copyright for this article belongs to Taylor & Francis Group. |
| Keywords: | Black-Scholes equations;Minimal martingale measure;Risk minimizing option price;Regime switching market. |
| Department/Centre: | Division of Physical & Mathematical Sciences |
| Date Deposited: | 13 May 2008 |
| Last Modified: | 27 Aug 2008 13:22 |
| URI: | http://eprints.iisc.ac.in/id/eprint/13922 |
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