The viscosity solutions approach to swing options pricing under a regime-switching mean-reverting model

Autor:	Lingjie Shao, Kaili Xiang, Yang Song
Jazyk:	angličtina
Rok vydání:	2018
Předmět:	Swing options Regime-switching Mean-reverting Variational inequalities Viscosity solutions Mathematics QA1-939
Zdroj:	Journal of Inequalities and Applications, Vol 2018, Iss 1, Pp 1-23 (2018)
Druh dokumentu:	article
ISSN:	1029-242X
DOI:	10.1186/s13660-018-1908-3
Popis:	Abstract In this paper, we study the valuation of swing options on electricity markets with local volume and refraction time constraints, under the setting that the dynamic of the underlying spot price is a 2-state regime-switching mean-reverting process. We derive the corresponding optimal multiple stopping problem, reduce it to a sequence of optimal single stopping problems, and further find that those value functions satisfy HJB variational inequalities subject to suitable conditions. Then after a prior estimation for the value functions, the viscosity solutions approach is adopted to get existence and uniqueness results in viscosity sense.
Databáze:	Directory of Open Access Journals
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