• Journal of the Chungcheong Mathematical Society
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• v.26 no.4
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• pp.787-791
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• 2013

In this paper we present one factor model of commodity prices with a single jump regime-switching process. And we derive an analytic formula for pricing futures contracts when the parameters of commoditiy process have governed by a Markov regime-switching process.

• Journal of the Chungcheong Mathematical Society
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• v.27 no.2
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• pp.237-242
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• 2014

In this paper we provide a valuation method for multi-asset derivatives with single jump regime-switching volatilities. We suppse that volatilities of assets are affected by an n-dimensional independent Markov regime-switching process.

• Management Science and Financial Engineering
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• v.19 no.1
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• pp.49-52
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• 2013

In this paper we provide a valuation formula for a variance swap with regime switching. A variance swap is a forward contract on variance, the square of realized volatility of the underlying asset. We assume that the volatility of underlying asset is governed by Markov regime-switching process with finite states. We find that the proposed model can provide ease of calculation and be superior to the models currently available.

• Journal of the Chungcheong Mathematical Society
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• v.27 no.2
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• pp.219-225
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• 2014

I use the dynamic programming approach to study the optimal consumption and investment problem with regime-switching and constant labor income. I derive the optimal solutions in closed-form with constant absolute risk aversion (CARA) utility and constant disutility.

• Journal of the Chungcheong Mathematical Society
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• v.28 no.1
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• pp.89-95
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• 2015

In this paper we investigate the pricing of European contingent claims under regime switching. We use the Mellin transform to derive an analytic form of the valuation of contingent claims.

• Journal of the Chungcheong Mathematical Society
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• v.25 no.2
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• pp.277-281
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• 2012

I study an optimal consumption and portfolio selection problem with regime-switching using a dynamic programming method. With constant relative risk aversion (CRRA) utility I obtain optimal solutions in closed-form.

• Journal of the Chungcheong Mathematical Society
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• v.26 no.1
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• pp.85-90
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• 2013

We use the dynamic programming method to investigate the optimal consumption and investment problem with regime-switching. We derive the optimal solutions in closed-form with constant absolute risk aversion (CARA) utility.

• Journal of the Korean Society for Industrial and Applied Mathematics
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• v.19 no.4
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• pp.429-441
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• 2015

We study optimal consumption/investment and life insurance purchase rules for a wage earner with mortality risk under regime-switching financial market conditions, in a continuous time-horizon. We apply the Markov chain approximation method and suggest an efficient algorithm using parallel computing to solve the simultaneous Hamilton-Jaccobi-Bellman equations arising from the optimization problem. We provide numerical results under the utility functions of the constant relative risk aversion type, with which we illustrate the effects of regime switching on the optimal policies by comparing them with those in the absence of regime switching.

• Journal of Korean Institute of Industrial Engineers
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• v.36 no.3
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• pp.203-211
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• 2010

This study examines a cointegrated vector autoregressive (VAR) model where parameters are subject to switch across the regimes in the term structure of interest rates. To employ the regime switching framework, the Markov-switching vector error correction model (MS-VECM) is allowed to the regime shifts in the vector of intercept terms, the variance-covariance terms, the error correction terms, and the autoregressive coefficient parts. The corresponding approaches are illustrated using the term structure of interest rates in the US Treasury bonds over the period of 1958 to 2009. Throughout the modeling procedure, we find that the MS-VECM can form a statistically adequate representation of the term structure of interest rate in the US Treasury bonds. Moreover, the regime switching effects are analyzed in connection with the historical government monetary policy and with the recent global financial crisis. Finally, the results from the comparisons both in information criteria and in forecasting exercises with and without the regime switching lead us to conclude that the models in the presence of regime dependence are superior to the linear VECM model.

• Journal of applied mathematics & informatics
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• v.32 no.5_6
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• pp.665-673
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• 2014

Power options have payoffs that are determined by the price of the underlying asset raised to some power. In this paper, power options are considered under a regime-switching model which can capture complex asset dynamics by permitting switching between different regimes. The pricing formulas for the Laplace transforms of power options are obtained. The prices of power options are calculated using the formulas and compared with the results of the Monte Carlo simulation.