Nagaev, Alexander V. Nagaev, Sergei A. Kunst, Robert M.
Year of Publication:
Reihe Ökonomie / Economics Series 165
A discrete time model of financial markets is considered. It is assumed that the stock price evolution is described by a homogeneous Markov chain. In the focus of attention is the expected value of the guaranteed profit of the investor that arises when the jumps of the stock price are bounded. The suggested diffusion approximation for the Markov chain allows establishing a convenient approximate formula for the studied characteristic.
ergodic and irreducible Markov chains stationary distribution local limit theorem upper hedge upper rational price