FINITE MATURITY AMERICAN-STYLE STOCK LOANS with REGIME-SWITCHING VOLATILITY

Xiaoping Lu; Endah R.M. Putri

doi:10.1017/S1446181121000250

FINITE MATURITY AMERICAN-STYLE STOCK LOANS with REGIME-SWITCHING VOLATILITY

Xiaoping Lu^*, Endah R.M. Putri

^*Corresponding author for this work

University of Wollongong

Research output: Contribution to journal › Article › peer-review

Abstract

We study finite maturity American-style stock loans under a two-state regime-switching economy. We present a thorough semi-analytic discussion of the optimal redeeming prices, the values and the fair service fees of the stock loans, under the assumption that the volatility of the underlying is in a state of uncertainty. Numerical experiments are carried out to show the effects of the volatility regimes and other loan parameters.

Original language	English
Pages (from-to)	163-177
Number of pages	15
Journal	ANZIAM Journal
Volume	63
Issue number	2
DOIs	https://doi.org/10.1017/S1446181121000250
Publication status	Published - 19 Apr 2021

Keywords

PDE approach
Regime-switching
Semi-analytic method
Stock loans
Volatility

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10.1017/S1446181121000250

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title = "FINITE MATURITY AMERICAN-STYLE STOCK LOANS with REGIME-SWITCHING VOLATILITY",

abstract = "We study finite maturity American-style stock loans under a two-state regime-switching economy. We present a thorough semi-analytic discussion of the optimal redeeming prices, the values and the fair service fees of the stock loans, under the assumption that the volatility of the underlying is in a state of uncertainty. Numerical experiments are carried out to show the effects of the volatility regimes and other loan parameters.",

keywords = "PDE approach, Regime-switching, Semi-analytic method, Stock loans, Volatility",

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N2 - We study finite maturity American-style stock loans under a two-state regime-switching economy. We present a thorough semi-analytic discussion of the optimal redeeming prices, the values and the fair service fees of the stock loans, under the assumption that the volatility of the underlying is in a state of uncertainty. Numerical experiments are carried out to show the effects of the volatility regimes and other loan parameters.

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KW - PDE approach

KW - Regime-switching

KW - Semi-analytic method

KW - Stock loans

KW - Volatility

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FINITE MATURITY AMERICAN-STYLE STOCK LOANS with REGIME-SWITCHING VOLATILITY

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Keywords

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