Valuation of Swing Options under a Regime-Switching Mean-Reverting Model

<table class="figure-group"><tr class="fig-image" id="a"><td><object data="https://static.hindawi.com/articles/mpe/volume-2019/5796921/figures/5796921.fig.003a.svgz" name="5796921.fig.003a" type="image/svg+xml"></object></td></tr><tr class="fig-caption"><td><b>(a) </b>Trinomial Tree for <svg height="11.6836pt" id="M350" style="vertical-align:-3.29562pt" version="1.1" viewbox="-0.0498162 -8.38798 11.9815 11.6836" width="11.9815pt" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink"><g transform="matrix(.013,0,0,-0.013,0,0)"><path d="M655 0V28C585 35 563 50 517 120C469 193 414 280 360 366C427 469 460 516 481 545C526 604 545 614 619 622V650H391V622C457 614 462 604 438 560C411 511 381 463 339 398C295 466 258 523 225 580C210 606 211 615 272 622V650H26V622C98 614 111 603 154 538C189 482 235 408 288 324C200 188 149 116 124 85C95 47 64 34 7 28V0H236V28C169 36 164 46 188 89C220 148 261 217 310 291C372 193 417 118 442 77C461 44 454 35 392 28V0H655Z"></path></g><g transform="matrix(.0091,0,0,-0.0091,8.502,3.132)"><path d="M303 37L293 66C280 59 256 49 231 49S173 63 173 143V396H281C294 404 298 428 287 439H173V575L158 577L92 509V439H46L17 408L22 396H92V107C92 27 128 -12 192 -12C203 -12 218 -9 237 2L303 37Z"></path></g></svg></td></tr><tr class="fig-image" id="b"><td><object data="https://static.hindawi.com/articles/mpe/volume-2019/5796921/figures/5796921.fig.003b.svgz" name="5796921.fig.003b" type="image/svg+xml"></object></td></tr><tr class="fig-caption"><td><b>(b) </b>Trinomial Tree for <svg height="12.0621pt" id="M351" style="vertical-align:-3.2957pt" version="1.1" viewbox="-0.0498162 -8.7664 9.6327 12.0621" width="9.6327pt" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink"><g transform="matrix(.013,0,0,-0.013,0,0)"><path d="M409 504C401 567 396 607 392 642C354 654 312 665 266 665C137 665 60 583 60 487C60 374 161 325 225 290C300 250 355 215 355 141C355 68 311 21 235 21C131 21 86 122 71 183L41 176C48 128 61 42 68 21C78 16 93 8 118 0C142 -7 175 -15 216 -15C349 -15 438 69 438 174C438 287 344 333 265 374C186 414 138 449 138 522C138 576 172 631 249 631C336 631 363 562 380 499L409 504Z"></path></g><g transform="matrix(.0091,0,0,-0.0091,6.162,3.132)"><path d="M303 37L293 66C280 59 256 49 231 49S173 63 173 143V396H281C294 404 298 428 287 439H173V575L158 577L92 509V439H46L17 408L22 396H92V107C92 27 128 -12 192 -12C203 -12 218 -9 237 2L303 37Z"></path></g></svg></td></tr></table>

<div>Trinomial tree for underlying variable.</div>

Mathematical Problems in Engineering

fig3

Figure 3

Figure 3: Valuation of Swing Options under a Regime-Switching Mean-Reverting Model 