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1. Calibrating an option pricing model under regime-switching volatility
University essay from Handelshögskolan i Stockholm/Institutionen för finansiell ekonomiAbstract : A Black-Scholes market is considered in which asset prices are modelled by a geometric Brownian motion with regime-switching volatility. The regime-switching allows the volatility to jump randomly amongst a finite number of volatility states. Pricing equations of European options are derived and the equations are solved numerically. READ MORE
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