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Asymptotic analysis of option pricing in a Markov modulated market

Arnab Basu & Mrinal K.Ghosh
Journal Name
Operations Research Letters
Journal Publication
others
Publication Year
2009
Decision Sciences and Information Systems
Publication Date
Vol.37 (2009) PP 415-419
Abstract

We address asymptotic analysis of option pricing in a regime switching market where the risk free interest rate, growth rate and the volatility of the stocks depend on a finite state Markov chain. We study two variations of the chain namely, when the chain is moving very fast compared to the underlying asset price and when it is moving very slow.

Asymptotic analysis of option pricing in a Markov modulated market

Author(s) Name: Arnab Basu & Mrinal K.Ghosh
Journal Name: Operations Research Letters
Volume: Vol.37 (2009) PP 415-419
Year of Publication: 2009
Abstract:

We address asymptotic analysis of option pricing in a regime switching market where the risk free interest rate, growth rate and the volatility of the stocks depend on a finite state Markov chain. We study two variations of the chain namely, when the chain is moving very fast compared to the underlying asset price and when it is moving very slow.