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Markov Switching And Jump Diffusion Models With Applications In Mathematical Finance, Shengkun Xie

Theses and Dissertations (Comprehensive)

In this thesis, we study some jump diffusion models with Markov switching and transition densities for Markov switching diffusion processes with and without an absorbing barrier. We work out some analytical results, which have useful applications in mathematical finance and other related fields. The first-passage time problem for a Markov switching model is also studied and European type options and lookback options are computed in closed-form as examples to show that these models can be applied in practice. We apply optimization methods and kernel smoothing techniques to produce some important numerical results that show that jump diffusion with Markov switching …