On the regularity of American options with regime-switching uncertainty

被引：8

作者：

Jacka, Saul D. ^{[1
,2
]}

Ocejo, Adriana ^{[3
]}

机构：

[1] Univ Warwick, Dept Stat, Coventry CV4 7AL, W Midlands, England

[2] Alan Turing Inst, British Lib, 96 Euston Rd, London NW1 2DB, England

[3] Univ North Carolina Charlotte, Dept Math & Stat, Charlotte, NC 28223 USA

来源：

STOCHASTIC PROCESSES AND THEIR APPLICATIONS | 2018年 / 128卷 / 03期

基金：

英国工程与自然科学研究理事会;

关键词：

Regime-switching; Markov-modulated; Time-change; Coupling; American option; Initial boundary value problem;

D O I：

10.1016/j.spa.2017.06.007

中图分类号：

O21 [概率论与数理统计]; C8 [统计学];

学科分类号：

020208 ; 070103 ; 0714 ;

摘要：

We study the regularity of the stochastic representation of the solution of a class of initial-boundary value problems related to a regime-switching diffusion. This representation is related to the value function of a finite-horizon optimal stopping problem such as the price of an American-style option in finance. We show continuity and smoothness of the value function using coupling and time-change techniques. As an application, we find the minimal payoff scenario for the holder of an American-style option in the presence of regime-switching uncertainty under the assumption that the transition rates are known to lie within level-dependent compact sets. (C) 2017 Elsevier B.V. All rights reserved.

引用

页码：803 / 818

页数：16

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