The Pricing and Hedging of an Attainable Claim in a Hybrid Black–Scholes Model under Regime Switching | Zendy

Kuanhou Tian | Zendy; Yanfang Li | Zendy; Guixin Hu | Zendy

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The Pricing and Hedging of an Attainable Claim in a Hybrid Black–Scholes Model under Regime Switching

Author(s) -

Kuanhou Tian,

Yanfang Li,

Guixin Hu

Publication year - 2021

Publication title -

discrete dynamics in nature and society

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.264

H-Index - 39

eISSN - 1607-887X

pISSN - 1026-0226

DOI - 10.1155/2021/5592901

Subject(s) - black–scholes model , hedge , mathematics , portfolio , mathematical economics , calculus (dental) , discrete mathematics , finance , economics , econometrics , medicine , volatility (finance) , ecology , dentistry , biology

This article formulates and dissects a Black–Scholes model with regime switching that can be used to describe the performance of a complete market. An explicit integrand formula ϕ t , ω is obtained when the T -claim F ω is given for an attainable claim in this complete market. In addition, some perfect results are presented on how to hedge an attainable claim for this Black–Scholes model, and the price p of the European call and the self-financing portfolio θ t = θ 0 t , θ 1 t are given explicitly. Finally, some concluding remarks are provided to illustrate the theoretical results.

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