Characteristic functions and option valuation in a Markov chain market
Date
2011
Authors
Elliott, R.
Liew, C.
Siu, T.
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Computers and Mathematics with Applications, 2011; 62(1):65-74
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Robert J. Elliott, Chuin Ching Liew and Tak Kuen Siu
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Abstract
We introduce an approach for valuing some path-dependent options in a discrete-time Markov chain market based on the characteristic function of a vector of occupation times of the chain. A pricing kernel is introduced and analytical formulas for the prices of Asian options and occupation time call options are derived. (C) 2011 Elsevier Ltd. All rights reserved.
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© 2011 Elsevier Ltd. All rights reserved.