Pricing and hedging of derivatives in markov modulated markets through benchmark approach

Abstract

The aim of the thesis is to study the pricing and hedging problems for contingent claims for various Markov modulated models through the benchmark approach This approach is based on a speciDc benchmark portfolio known as the growth optimal portfolio GOP GOP has been obtained for diDerent market models using the stochastic control method When used as a numeraire GOP ensures that all the benchmarked price processes are supermartingales Using this supermartingale nature of benchmarked price