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http://dx.doi.org/10.14317/jami.2014.665

PRICING OF POWER OPTIONS UNDER THE REGIME-SWITCHING MODEL  

Kim, Jerim (Department of Business Administration, Yong In University)
Publication Information
Journal of applied mathematics & informatics / v.32, no.5_6, 2014 , pp. 665-673 More about this Journal
Abstract
Power options have payoffs that are determined by the price of the underlying asset raised to some power. In this paper, power options are considered under a regime-switching model which can capture complex asset dynamics by permitting switching between different regimes. The pricing formulas for the Laplace transforms of power options are obtained. The prices of power options are calculated using the formulas and compared with the results of the Monte Carlo simulation.
Keywords
power option; regime-switching model; option pricing; Laplace transform;
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Times Cited By KSCI : 1  (Citation Analysis)
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