Continuous-Time Markov Chain and Regime Switching Approximations with Applications to Options Pricing

2019 ◽  
Author(s):  
Zhenyu Cui ◽  
Justin Kirkby ◽  
Duy Nguyen
Keyword(s):  
Markov Chain ◽  
Continuous Time ◽  
Regime Switching ◽  
Options Pricing ◽  
Continuous Time Markov Chain

scholarly journals Pricing energy contracts under regime switching time-changed Levy Processes

2021 ◽  
Author(s):  
Konrad Gajewski
Keyword(s):  
Markov Chain ◽  
Characteristic Function ◽  
Continuous Time ◽  
Regime Switching ◽  
Switching Time ◽  
Continuous Time Markov Chain ◽  
Energy Data ◽  
Varying Parameters ◽  
Call Options ◽  
Black Scholes

The failures of the popular Black-Scholes-Merton (BSM) model led to an interest in new, robust models which could more accurately model the behavior of historical prices. We consider one such model, the regime switching time-changed Levy process, which builds upon the BSM model by incorporating jumps through a random clock, as well as randomly varying parameters according to a continuous-time Markov chain. We develop the characteristic function as well as two methods for pricing European call options. Finally, we estimate the parameters of the model by incorporating historic energy data and option quotes using a variety of methods.

scholarly journals Pricing energy contracts under regime switching time-changed Levy Processes

2021 ◽  
Author(s):  
Konrad Gajewski
Keyword(s):  
Markov Chain ◽  
Characteristic Function ◽  
Continuous Time ◽  
Regime Switching ◽  
Switching Time ◽  
Continuous Time Markov Chain ◽  
Energy Data ◽  
Varying Parameters ◽  
Call Options ◽  
Black Scholes

The failures of the popular Black-Scholes-Merton (BSM) model led to an interest in new, robust models which could more accurately model the behavior of historical prices. We consider one such model, the regime switching time-changed Levy process, which builds upon the BSM model by incorporating jumps through a random clock, as well as randomly varying parameters according to a continuous-time Markov chain. We develop the characteristic function as well as two methods for pricing European call options. Finally, we estimate the parameters of the model by incorporating historic energy data and option quotes using a variety of methods.

scholarly journals Adaptive Duty Cycling in Sensor Networks With Energy Harvesting Using Continuous-Time Markov Chain and Fluid Models

2015 ◽  
Vol 33 (12) ◽  
pp. 2687-2700 ◽  
Author(s):  
Wai Hong Ronald Chan ◽  
Pengfei Zhang ◽  
Ido Nevat ◽  
Sai Ganesh Nagarajan ◽  
Alvin C. Valera ◽  
...  
Keyword(s):  
Markov Chain ◽  
Sensor Networks ◽  
Energy Harvesting ◽  
Continuous Time ◽  
Fluid Models ◽  
Continuous Time Markov Chain ◽  
Duty Cycling
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