TY - JOUR
T1 - On pricing barrier control in a regime-switching regulated market
AU - Han, Zheng
AU - Hu, Yaozhong
AU - Lee, Chihoon
N1 - Publisher Copyright:
© 2018, © 2018 Informa UK Limited, trading as Taylor & Francis Group.
PY - 2019/3/4
Y1 - 2019/3/4
N2 - We study a pricing barrier control problem in a regime-switching regulated market. In doing so, we analyze a class of one-dimensional reflected regime-switching diffusion processes. Such diffusion models arise as the key approximating processes in a regulated financial market system with the presence of regime changes. Our main goal is to determine optimal pricing barriers as solutions of long-run average mean–variance optimization problems. More precisely, the optimal barrier, if exists, will be to maximize the long-run average expected return (i.e. steady-state mean) subject to a selected level of long-run average risk (i.e. steady-state variance).
AB - We study a pricing barrier control problem in a regime-switching regulated market. In doing so, we analyze a class of one-dimensional reflected regime-switching diffusion processes. Such diffusion models arise as the key approximating processes in a regulated financial market system with the presence of regime changes. Our main goal is to determine optimal pricing barriers as solutions of long-run average mean–variance optimization problems. More precisely, the optimal barrier, if exists, will be to maximize the long-run average expected return (i.e. steady-state mean) subject to a selected level of long-run average risk (i.e. steady-state variance).
KW - Ergodic control
KW - Mean–variance optimization
KW - Optimal barriers
KW - Reflected diffusions
KW - Regime-switching
KW - Regulated market
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U2 - 10.1080/14697688.2018.1480835
DO - 10.1080/14697688.2018.1480835
M3 - Article
AN - SCOPUS:85052096765
SN - 1469-7688
VL - 19
SP - 491
EP - 499
JO - Quantitative Finance
JF - Quantitative Finance
IS - 3
ER -