Download or read book Perpetual American Options in Regime-Switching Models written by Svetlana Boyarchenko and published by . This book was released on 2007 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the paper, we solve the pricing problem for perpetual American options in Markov-modulated Levy models. The early exercise boundaries and prices are calculated using an iteration procedure. The pricing procedure is efficient even if the number of states is large provided the transition rates are not large w.r.t. the riskless rates. The payoffs and riskless rates may depend on a state. Special cases are stochastic volatility models and models with stochastic interest rate; both must be modelled as finite-state Markov chains.