Option price computation under binary control regime switching triple-factor stochastic volatility model

Philip Ajibola Bankole; Olabisi O. Ugbebor; Murphy E. Egwe

Makale detayları

Option price computation under binary control regime switching triple-factor stochastic volatility model

Yazarlar:

Philip Ajibola Bankole | Olabisi O. Ugbebor | Murphy E. Egwe

Yayıncı:

Hacettepe University

Ana Başlıklar:

Financial Mathematics

Dergi:

Hacettepe Journal of Mathematics and Statistics Vol.54 Issue 3, pp.1049-1061

Belge Tipi:

Makale

Yayın Tarihi:

6/2025

Belge Dili:

İngilizce

Document ID (Org No.):

2001351216

pISSN:

2651-477X

Anahtar kelimeler:

Özet:

 This study presents an efficient pricing framework for European call options under a binary control regime that switches to a triple-factor stochastic volatility model, tailored for recessionary and stable market phases. The model captures regime transitions via binary controls and incorporates triple volatility sources. We derive the characteristic function and implement a semi-analytical pricing formula using trapezoidal and Gauss-Laguerre quadrature in MATLAB. The economic recovery process is influenced by the control parameter alpha, while the impacts theta_3 are considered secondary to other factors driving recovery. The results show that the option prices under recessionary conditions were lower compared to the recession-free regime, thereby validating the models sensitivity to macroeconomic uncertainty. It further confirms that the binary control regime switching triple-factor stochastic volatility model offers greater accuracy and adaptability across economic states, making it a promising tool for option pricing in dynamic financial environments.

 This study presents an efficient pricing framework for European call options under a binary control regime that switches to a triple-factor stochastic volatility model, tailored for recessionary and stable market phases. The model captures regime transitions via binary controls and incorporates triple volatility sources. We derive the characteristic function and implement a semi-analytical pricing formula using trapezoidal and Gauss-Laguerre quadrature in MATLAB. The economic recovery process is influenced by the control parameter alpha, while the impacts theta_3 are considered secondary to other factors driving recovery. The results show that the option prices under recessionary conditions were lower compared to the recession-free regime, thereby validating the models sensitivity to macroeconomic uncertainty. It further confirms that the binary control regime switching triple-factor stochastic volatility model offers greater accuracy and adaptability across economic states, making it a promising tool for option pricing in dynamic financial environments.

 This study presents an efficient pricing framework for European call options under a binary control regime that switches to a triple-factor stochastic volatility model, tailored for recessionary and stable market phases. The model captures regime transitions via binary controls and incorporates triple volatility sources. We derive the characteristic function and implement a semi-analytical pricing formula using trapezoidal and Gauss-Laguerre quadrature in MATLAB. The economic recovery process is influenced by the control parameter alpha, while the impacts theta_3 are considered secondary to other factors driving recovery. The results show that the option prices under recessionary conditions were lower compared to the recession-free regime, thereby validating the models sensitivity to macroeconomic uncertainty. It further confirms that the binary control regime switching triple-factor stochastic volatility model offers greater accuracy and adaptability across economic states, making it a promising tool for option pricing in dynamic financial environments.

 This study presents an efficient pricing framework for European call options under a binary control regime that switches to a triple-factor stochastic volatility model, tailored for recessionary and stable market phases. The model captures regime transitions via binary controls and incorporates triple volatility sources. We derive the characteristic function and implement a semi-analytical pricing formula using trapezoidal and Gauss-Laguerre quadrature in MATLAB. The economic recovery process is influenced by the control parameter alpha, while the impacts theta_3 are considered secondary to other factors driving recovery. The results show that the option prices under recessionary conditions were lower compared to the recession-free regime, thereby validating the models sensitivity to macroeconomic uncertainty. It further confirms that the binary control regime switching triple-factor stochastic volatility model offers greater accuracy and adaptability across economic states, making it a promising tool for option pricing in dynamic financial environments.

Makale detayları

Option price computation under binary control regime switching triple-factor stochastic volatility model

Yazarlar:

Philip Ajibola Bankole | Olabisi O. Ugbebor | Murphy E. Egwe

Yayıncı:

Hacettepe University

Ana Başlıklar:

Financial Mathematics

Dergi:

Hacettepe Journal of Mathematics and Statistics Vol.54 Issue 3, pp.1049-1061

Belge Tipi:

Makale

Yayın Tarihi:

6/2025

Belge Dili:

İngilizce

Document ID (Org No.):

2001351216

pISSN:

2651-477X

Binary control

economic recession

option computation

triple factor stochastic volatility.

Sayı

Makale detayları

Option price computation under binary control regime switching triple-factor stochastic volatility model

Yazarlar: Philip Ajibola Bankole | Olabisi O. Ugbebor | Murphy E. Egwe

Yayıncı: Hacettepe University

Ana Başlıklar: Financial Mathematics

Dergi: Hacettepe Journal of Mathematics and Statistics Vol.54 Issue 3, pp.1049-1061

Belge Tipi: Makale

Yayın Tarihi: 6/2025

Belge Dili: İngilizce

Document ID (Org No.): 2001351216

pISSN: 2651-477X

Binary control

economic recession

option computation

triple factor stochastic volatility.

Sayı

Yazarlar:

Philip Ajibola Bankole | Olabisi O. Ugbebor | Murphy E. Egwe

Yayıncı:

Hacettepe University

Ana Başlıklar:

Financial Mathematics

Dergi:

Hacettepe Journal of Mathematics and Statistics Vol.54 Issue 3, pp.1049-1061

Belge Tipi:

Makale

Yayın Tarihi:

6/2025

Belge Dili:

İngilizce

Document ID (Org No.):

2001351216

pISSN:

2651-477X