Rainbow Options under Bayesian MS-VAR Process

Battulga Gankhuu

Papers from arXiv.org

Abstract: This paper presents pricing and hedging methods for rainbow options and lookback options under Bayesian Markov-Switching Vector Autoregressive (MS--VAR) process. Here we assumed that a regime-switching process is generated by a homogeneous Markov process. An advantage of our model is it depends on economic variables and simple as compared with previous existing papers.

Date: 2021-12, Revised 2023-05
New Economics Papers: this item is included in nep-ore and nep-rmg
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