On pricing and hedging options in regime-switching models with feedback effect

被引：32

作者：

Elliott, Robert J. ^{[1
,2
]}

Siu, Tak Kuen ^{[3
]}

Badescu, Alexandru ^{[4
]}

机构：

[1] Univ Adelaide, Sch Math Sci, Adelaide, SA 5005, Australia

[2] Univ Calgary, Haskayne Sch Business, Calgary, AB T2N 1N4, Canada

[3] Macquarie Univ, Dept Actuarial Studies, Fac Business & Econ, Sydney, NSW 2109, Australia

[4] Univ Calgary, Dept Math & Stat, Calgary, AB T2N 1N4, Canada

来源：

JOURNAL OF ECONOMIC DYNAMICS & CONTROL | 2011年 / 35卷 / 05期

关键词：

Pricing and hedging; Regime-switching; Feedback effect; Product price kernel; Local risk-minimization; INTEREST-RATES; TERM STRUCTURE; STOCK-MARKET; VOLATILITY;

D O I：

10.1016/j.jedc.2010.12.014

中图分类号：

F [经济];

学科分类号：

02 ;

摘要：

We study the pricing and hedging of European-style derivative securities in a Markov, regime-switching, model with a feedback effect depending on the economic condition. We adopt a pricing kernel which prices both financial and economic risks explicitly in a dynamically incomplete market and we provide an equilibrium analysis. A martingale representation for a European-style index option's price is established based on the price kernel. The martingale representation is then used to construct the local risk-minimizing strategy explicitly and to characterize the corresponding pricing measure. (C) 2011 Elsevier B.V. All rights reserved.

引用

页码：694 / 713

页数：20

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