Please use this identifier to cite or link to this item: http://hdl.handle.net/1959.14/110253
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- Title
- Option valuation under a multivariate Markov chain model
- Related
- International Joint Conference on Computational Sciences and Optimization (3rd : 2010) (28 - 31 May 2010 : Huangshan, Anhui, China)
- Related
- Yu, Lean; Song, Yingwen; Ching, Wai-Ki; Wang, Shouyang and Lai, K. K.. Third International Joint Conference on Computational Sciences and Optimization : proceedings, Huangshan, Anhui, China, 28-31 May 2010, Vol. 1, p.177-181
- DOI
- 10.1109/CSO.2010.73
- Publisher
- Piscataway, NJ : IEEE
- Date
- 2010
- FoR/RFCD Code(s)
-
150200 Banking, Finance and Investment
- Author/Creator
- Song, Na
- Author/Creator
- Ching, Wai-Ki
- Author/Creator
- Siu, Tak-Kuen
- Author/Creator
- Fung, Eric S
- Author/Creator
- Ng, Micheal K
- Description
- In this paper, we develop an option valuation model in the context of a discrete-time multivariate Markov chain model using the Esscher transform. The multivariate Markov chain provides a flexible way to incorporate the dependency of the underlying asset price processes and price multi-state options written on several dependent underlying assets. In our model, the price of an individual asset can take finitely many values. The market described by our model is incomplete in general, hence there are more than one equivalent martingale pricing measures. We adopt conditional Esscher transform to determine an equivalent martingale measure for option valuation. We also document consequences for option prices of the dependency of the underlying asset prices described by the multivariate Markov chain model.
- Description
- 5 page(s)
- Subject Keyword
- 150200 Banking, Finance and Investment
- Subject Keyword
- asset prices
- Subject Keyword
- discrete-time
- Subject Keyword
- optimization
- Subject Keyword
- security of data
- Subject Keyword
- Esscher transform
- Subject Keyword
- Markov chain
- Subject Keyword
- Markov chain models
- Subject Keyword
- martingale measures
- Subject Keyword
- multi state
- Subject Keyword
- option price
- Subject Keyword
- option valuation
- Subject Keyword
- Markov processes
- Resource Type
- conference paper
- Organisation
- Macquarie University. Dept. of Actuarial Studies
- Identifier
- http://hdl.handle.net/1959.14/110253
- Identifier
- ISBN:9781424468126
- Identifier
- mq-rm-2010001561
- Language
- eng
- Full Text
- Reviewed
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