Journal ArticleDOI
A Correction Note on: When the “Bull” Meets the “Bear”—A First Passage Time Problem for a Hidden Markov Process
TLDR
Guo as discussed by the authors derived the Laplace transform of the first passage time in a 2-state Markov-switching model and gave one of the pioneering works improving the analytical tractability of Markov switching models.Abstract:
Guo (Methodol Comput Appl Probab 3(2):135–143, 2001a) derived the Laplace transform of the first-passage time in a 2-state Markov-switching model and gave one of the pioneering works improving the analytical tractability of Markov-switching models. However, the Laplace transforms in her paper are wrong. This short note provides the correct expression and an alternative proof using the matrix Wiener–Hopf technique.read more
Citations
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Journal ArticleDOI
Cliquet-style return guarantees in a regime switching Lévy model
TL;DR: In this article, the authors consider the valuation of equity-linked life insurance contracts that offer an annually guaranteed minimum return, where the policy premiums are invested in a reference portfolio that is modeled by means of a regime switching Levy process where the model parameters depend on a continuous-time, finite state Markov chain.
Journal ArticleDOI
Pricing exotic options in a regime switching economy: A Fourier transform method
TL;DR: In this paper, the authors considered the valuation of digital, barrier, and lookback options in a Markovian, regime-switching, Black-Scholes model and derived integral representations for the option prices via the theory on matrix Wiener-Hopf factorizations.
Journal ArticleDOI
First-passage times of regime switching models
TL;DR: In this article, the Laplace transform of the regime switching Brownian motion in the 2-and 3-state model is derived in closed-form by solving the matrix Wiener-Hopf factorization.
Posted Content
First Passage Times of Regime Switching Models
Peter Hieber,Peter Hieber +1 more
TL;DR: In this article, the authors present the probability of a stochastic process to first breech upper and/or lower levels of a regime switching Brownian motion in the 2-and 3-state model.
Journal ArticleDOI
Some characterizations for Brownian motion with Markov switching
TL;DR: In this paper, the maximum distribution estimates for one-dimensional Brownian motion with Markov switching were obtained by solving the corresponding Poisson problem and the results revealed the impact on mean exit time and the Laplace transform of the exit time as σ 1 tends to σ 2.
References
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Journal ArticleDOI
American options with regime switching
TL;DR: In this paper, a Black-Scholes market is considered in which the underlying economy, as modeled by the parameters and volatility of the processes, switches between a finite number of states.
Journal ArticleDOI
Option pricing and Esscher transform under regime switching
TL;DR: In this article, the authors consider the option pricing problem when the risky underlying assets are driven by Markov-modulated Geometric Brownian Motion (GBM) and adopt a regime switching random Esscher transform to determine an equivalent martingale pricing measure.
Journal ArticleDOI
Fluid Models in Queueing Theory and Wiener-Hopf Factorization of Markov Chains
TL;DR: In this paper, the invariant distribution for an infinite buffer model and for a finite-buffer model are derived for a number of questions in the theory of fluid models of queues, and the laws of other functionals of the fluid models can be easily derived and compactly expressed in terms of the fundamental WienerHopf factorization.
Journal ArticleDOI
Closed-Form Solutions for Perpetual American Put Options with Regime Switching
Qing Zhang,Xin Guo +1 more
TL;DR: This paper studies an optimal stopping time problem for pricing perpetual American put options in a regime switching model using the ``modified smooth fit' technique" and obtains an explicit optimal stopping rule and the corresponding value function in a closed form.
Journal ArticleDOI
Stationary distributions for fluid flow models with or without Brownian noise
TL;DR: In this paper, the authors consider a process with reflection at the origin and paths which are piecewise linear or Brownian, with the drift and variance constants being determined by the state of an underlying finite Markov process; the purely linear case corresponds to fluid flow models of current interest in telecommunications engineering.
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