Download or read book American Options in Regime-Switching Lévy Models With Non-Semibounded Stochastic Interest Rates written by Svetlana Boyarchenko and published by . This book was released on 2008 with total page 6 pages. Available in PDF, EPUB and Kindle. Book excerpt: A general numerical method for pricing American options in regime-switching jump-diffusion models of stock dynamics with stochastic interest rates and/or volatility is developed. Time derivative and infinitesimal generator of the process for factors that determine the dynamics of the interest rate and/or volatility are discretized. The result is a sequence of embedded perpetual options in a Markov-modulated Leacute;vy model. Options in this sequence are solved using an iteration method based on the Wiener-Hopf factorization. Contrary to the earlier version of the method, the interest rate may assume non-positive values. As applications, explicit algorithms for Vasicek and Black's models with jumps are derived. Numerical examples show that the option prices in these two models are very close.