A risk-based approach for pricing American options under a generalized Markov regime-switching model

作者：Elliott Robert J^*; Siu Tak Kuen

来源：Quantitative Finance, 2011, 11(11): 1633-1646.

DOI：10.1080/14697688.2011.615215

• Risk-based pricing
• American contingent claims
• Stochastic differential game
• Economic risk
• Financial risk
• Convex risk measure
• HJBI variational inequalities

This paper considers a risk-based approach for pricing an American contingent claim in an incomplete market described by a continuous-time, Markov, regime-switching jump-diffusion model. We formulate the valuation problem as a stochastic differential game and use dynamic programming. Verification theorems for the Hamilton-Jacobi-Bellman-Issacs (HJBI) variational inequalities of the games are used to determine the seller';s and buyer';s prices and optimal exercise strategies.

• 出版日期2011