ATTAINABLE CONTINGENT CLAIMS IN A MARKOVIAN REGIME-SWITCHING MARKET

Robert J. Elliott () and Tak Kuen Siu
Additional contact information
Robert J. Elliott: School of Mathematical Sciences, University of Adelaide, Adelaide, SA 5005, Australia;

International Journal of Theoretical and Applied Finance (IJTAF), 2012, vol. 15, issue 08, 1-19

Abstract: It is known that the market in a Markovian regime-switching model is, in general, incomplete, so not all contingent claims can be perfectly hedged. We show, in this paper, how certain contingent claims are attainable in the regime-switching market using a money market account, a share and a zero-coupon bond. General contingent claims with payoffs depending on both the share price and the state of the regime-switching process are considered. We apply a martingale representation result to show the attainability of a European-style contingent claim. We also extend our analysis to Asian-style and American-style contingent claims.

Keywords: Contingent claims; attainability; hedging; Markovian regime switching models; martingale representation; exotic options (search for similar items in EconPapers)
Date: 2012
References: View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0219024912500550
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:ijtafx:v:15:y:2012:i:08:n:s0219024912500550

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0219024912500550

Access Statistics for this article

International Journal of Theoretical and Applied Finance (IJTAF) is currently edited by L P Hughston

More articles in International Journal of Theoretical and Applied Finance (IJTAF) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().