Yoon, Ji Hee
[VerfasserIn]
;
Choi, U. Jin
[Sonstige Person, Familie und Körperschaft];
Lim, Byung Hwa
[Sonstige Person, Familie und Körperschaft];
Jang, Bong-Gyu
[Sonstige Person, Familie und Körperschaft]
A Lattice Method for Lookback Options with Regime-Switching Volatility
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments May 24, 2011 erstellt
Beschreibung:
We develop a lattice method for pricing lookback options in a regime-switching market environment. We assume the market is governed by a two-state Markov chain and stock volatility can change whenever the market environment changes. We develop a method which resolves the bias in the binomial method of Babbs (2000), and combine it with the pentanomial method of Bollen (1998). Our method can be used for American-style lookback options as well as European-style lookback options and is a simple but efficient way for pricing them compared with the methods currently available. We also analyze the convergence of the proposed method