Option pricing driven by a telegraph process with random jumps
In this paper we propose a class of financial market models which are based on telegraph processes with alternating tendencies and jumps. It is assumed that the jumps have random sizes and that they occur when the tendencies are switching. These models are typically incomplete, but the set of equiva...
- Autores:
- Tipo de recurso:
- Fecha de publicación:
- 2012
- Institución:
- Universidad del Rosario
- Repositorio:
- Repositorio EdocUR - U. Rosario
- Idioma:
- eng
- OAI Identifier:
- oai:repository.urosario.edu.co:10336/22231
- Acceso en línea:
- https://doi.org/10.1239/jap/1346955337
https://repository.urosario.edu.co/handle/10336/22231
- Palabra clave:
- Equivalent martingale measure
Hedging
Jump-telegraph process
Option pricing
- Rights
- License
- Abierto (Texto Completo)
| Summary: | In this paper we propose a class of financial market models which are based on telegraph processes with alternating tendencies and jumps. It is assumed that the jumps have random sizes and that they occur when the tendencies are switching. These models are typically incomplete, but the set of equivalent martingale measures can be described in detail. We provide additional suggestions which permit arbitrage-free option prices as well as hedging strategies to be obtained. © Applied Probability Trust 2012. |
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