Abstract
This paper is concerned with the valuation of single and double barrier knock-out call options in a Markovian regime switching model with specific rebates. The integral formulas of the rebates are derived via matrix Wiener-Hopf factorizations and Fourier transform techniques, also, the integral representations of the option prices are constructed. Moreover, the first-passage time density functions in two-state regime model are derived. As applications, several numerical algorithms and numerical examples are presented.
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This research is supported by the Key Projects of Statistics Bureau of Zhejiang Province (No. 23TJZZ17) and the Humanities and Social Sciences Program of Ministry of Education of China (No. 21YJA910005).
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Zhao, Yx., Bao, Jy. Barrier Option Pricing in Regime Switching Models with Rebates. Acta Math. Appl. Sin. Engl. Ser. 40, 849–861 (2024). https://doi.org/10.1007/s10255-024-1053-3
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DOI: https://doi.org/10.1007/s10255-024-1053-3