Codes for "Option Pricing and Hedging for Discrete Time Autoregressive Hidden Markov Model"
https://arxiv.org/abs/1707.02019
the following models are available for modelisation
- HMM (hidden markov model)
- ARHMM (autoregressive hidden markov model)
- VHMM (multidimentional hidden hidden markov model)
- VARHMM (multidimentional autoregressive hidden hidden markov model)
Est<model>.m for calibrating the models
Gof<model>.m for Goodness-of-fit test
Sim<model>.m for simulation
to simulate some processes, calibrate the different models and run Godness-of-fit test, run:
simulate_and_calibrate.m
the following models are available for hedging:
- Delta-Hedging
(HedgingError_DH.m) - Optimal Hedging with Gaussian Returns
(HedgingError_Gaussian.m OR HedgingGaussian.m + Hedging_Error_Gaussian_ac.m - Optimal Hedging with HMM Returns and Semi-exact approximation
(HedgingError_HMM.m OR HedgingHMM.m + Hedging_Error_HMM_ac.m - Optimal Hedging with HMM Returns and Monte Carlo approximation
(HedgingError_HMM_MC.m OR HedgingHMM.m + Hedging_Error_HMM_ac.m - Optimal Hedging with ARHMM Returns and Semi-exact approximation
(HedgingError_ARHMM.m OR HedgingARHMM.m + Hedging_Error_ARHMM_ac.m - Optimal Hedging with ARHMM Returns and Monte Carlo approximation
(HedgingError_ARHMM_MC.m OR HedgingARHMM.m + Hedging_Error_ARHMM_ac.m
to price an option and hedge it under multiple simulations, run:
simulate_and_hedge.m
this script will reproduce Figure 8: