This paper proposes an auxiliary particle filter algorithm for inference in regime switching stochastic volatility models in which the regime state is governed by a first-order Markov chain. We proposes an ongoing updated Dirichlet distribution to estimate the transition probabilities of the...

In this paper we consider the pricing of an American call option whose underlying asset dynamics evolve under the influence of two independent stochastic volatility processes of the Heston (1993) type. We derive the associated partial differential equation (PDE) of the option price using hedging...