|
|||||
|
|
Pricing external barrier options in a regime-switching model |
|
| Institution: | 1. Department of Business Administration, Yong In University, 134, Yongindaehak-ro, Cheoin-gu, Yongin-si, Gyeonggi-do, 449-714, South Korea;2. Department of Mathematics Education, Chungbuk National University, 1 Chungdae-ro, Seowon-gu, Cheongju, Chungbuk, 362-763, South Korea;3. Department of Mathematics, Korea University, 145, Anam-ro, Seongbuk-gu, Seoul 136-701, South Korea;1. Department of Mathematics, Faculty of Science, Kasetsart University, Bangkok 10900, Thailand;2. Department of Mathematics and Computer Science, Faculty of Science, Chulalongkorn University, Bangkok 10330, Thailand |
| Abstract: | External barrier options are two-asset options where the payoff is defined on one asset and the barrier is defined on another asset. In this paper, we derive the Laplace transforms of the prices and deltas for the external single and double barrier options where the underlying asset prices follow a regime-switching model with finite regimes. The derivation is made possible because we can obtain the joint Laplace transform of the first passage time of one asset value and the value of the other asset. Numerical inversion of the Laplace transforms is used to calculate the prices of external barrier options. |
| Keywords: | External barrier option Regime-switching First passage time Sylvester matrix equation Laplace transform Option price |
| 本文献已被 ScienceDirect 等数据库收录！ | |