Characteristic functions and option valuation in a Markov Chain market

Robert J. Elliott; Chuin Ching Liew; Tak Kuen Siu

doi:10.1016/j.camwa.2011.04.050

Characteristic functions and option valuation in a Markov Chain market

Robert J. Elliott, Chuin Ching Liew, Tak Kuen Siu

Department of Applied Finance

Research output: Contribution to journal › Article › peer-review

4 Citations (Scopus)

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.

Original language	English
Pages (from-to)	65-74
Number of pages	10
Journal	Computers and Mathematics with Applications
Volume	62
Issue number	1
DOIs	https://doi.org/10.1016/j.camwa.2011.04.050
Publication status	Published - Jul 2011

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Characteristic functions and option valuation in a Markov Chain market

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