Option pricing using hidden Markov models
Master Thesis
2006
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University of Cape Town
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Abstract
This work will present an option pricing model that accommodates parameters that vary over time, whilst still retaining a closed-form expression for option prices: the Hidden Markov Option Pricing Model. This is possible due to the macro-structure of this model and provides the added advantage of ensuring efficient computation of option prices. This model turns out to be a very natural extension to the Black-Scholes model, allowing for time-varying input parameters.
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Includes bibliographical references (leaves 144-149).
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Anderson, M. 2006. Option pricing using hidden Markov models. University of Cape Town.