Manuel Morales, PhD

Regime-switching models (RSM) have been recently used in the literature as alternatives to the Black-Scholes model. Several authors favor RSM as being more realistic since, by construction, they model those exogenous macroeconomic cycles against which asset prices evolve. In the context of derivatives pricing, these models lead to incomplete markets and therefore there exist multiple Equivalent Martingale Measures (EMM) yielding different pricing rules. A fair amount of liter

I attended and presented a contributed talk at this congress.