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

Kuanhou Tian, Yanfang Li, Guixin Hu and Wei Li

Discrete Dynamics in Nature and Society, 2021, vol. 2021, 1-10

Abstract: 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 ϕt,ω is obtained when the T-claim Fω 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 θt=θ0t,θ1t are given explicitly. Finally, some concluding remarks are provided to illustrate the theoretical results.

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:hin:jnddns:5592901

DOI: 10.1155/2021/5592901

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