Article

Pricing warrant bonds under a Markov-modulated jump diffusion process

  • WANG Wei ,
  • ZHAO Qi-Jie
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  • Department of Mathematics, Ningbo University, Ningbo Zhejiang 315211, China

Online published: 2015-02-07

Abstract

By the method of measure transformation and no arbitrage pricing theory, the explicit analytical formula of warrant bonds was obtained when the risky asset followed the Markov-modulated jump diffusion process and the market interest rate was stochastic. Moreover, a numerical analysis was provided by the Monte Carlo method, and the value of warrant bonds was compared when the risky asset satisfied different financial models.

Cite this article

WANG Wei , ZHAO Qi-Jie . Pricing warrant bonds under a Markov-modulated jump diffusion process[J]. Journal of East China Normal University(Natural Science), 2014 , 2014(6) : 39 -48 . DOI: 10.3969/j.issn.1000-5641.2014.06.007

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