A lattice method for option pricing with two underlying assets in the regime-switching model
A lattice method for option pricing with two underlying assets in the regime-switching model
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DOI：
10.1016/j.cam.2013.02.012
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发表时间：
2013-10
期刊：
影响因子：
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通讯作者：
R. Liu;J. Zhao
中科院分区：
文献类型：
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作者：
R. Liu;J. Zhao
在这项工作中，我们开发了一个有效的格子方法的期权定价与两个基础资产的价格由政权转换模型。跳跃幅度以这样的方式指定，使得晶格沿着每个资产变量实现完整的节点重组，并且随着时间步长的增加而二次增长。跳跃概率是通过求解一个相关的二次规划问题得到的。建立了连续时间区域切换扩散过程离散格点逼近的弱收敛性。格是用来定价的欧洲和美国的期权写在两个资产的最大值和最小值在不同的制度。用蒙特-卡罗模拟方法对欧式期权进行了数值计算和比较。
In this work we develop an efficient lattice approach for option pricing with two underlying assets whose prices are governed by regime-switching models. Jump amplitudes are specified in a way such that the lattice achieves complete node recombination along each asset variable and grows quadratically as the number of time steps increases. Jump probabilities are obtained by solving a related quadratic programming problem. The weak convergence of the discrete lattice approximations to the continuous-time regime-switching diffusion processes is established. The lattice is employed to price both European and American options written on the maximum and minimum of two assets in different regimes. Numerical results are provided and compared for the European options with a Monte-Carlo simulation approach.