Option pricing in regime-switching frameworks with the Extended Girsanov Principle

Godin, Frédéric; Trottier, Denis-Alexandre

doi:10.1016/j.insmatheco.2021.02.007

Cited by 5 publications

(1 citation statement)

References 38 publications

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“…Monte-Carlo simulations that numerically analyse the pricing of options in this regime have been examined extensively by [18] [19] [20]. Regime switching models that account for markets that may switch from time to time between a stable low-volatility state and an unstable high-volatility regime have been proposed by [21] and further examined by [22] [23] [24] [25]. The class of hyperbolic distributions that capture empirical data following pure jump distributions and characterized by infinitely divisible fat-tails have been introduced in [26] [27].…”

Section: Literature Reviewmentioning

confidence: 99%

Poisson Process Modeling of Pure Jump Equities on the Ghana Stock Exchange

Antwi¹,

Bright²,

Issa³

2022

JAMP

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Although Geometric Brownian Motion and Jump Diffusion Models have largely dominated the literature on asset price modeling, studies of the empirical stock price data on the Ghana Stock Exchange have led to the conclusion that there are some stocks in which the return processes consistently depart from these models in theory as well as in its statistical properties. This paper gives a fundamental review of the development of a stock price model based on pure jump processes to capture the unique behavior exhibited by some stocks on the Exchange. Although pure jump processes have been examined thoroughly by other authors, there is a lack of mathematical clarity in terms of deriving the underlying stock price process. This paper provides a link between stock prices existing on a measure space to its development as a pure jump Levy process. We test the suitability of the model to the empirical evidence using numerical procedures. The simulation results show that the trajectories of the model are a better fit for the empirical data than those produced by the diffusion and jump diffusion models.

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