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Regime-switching models have been heavily studied recently, as they have some clear advantages of over other non-constant volatility model to resolve the so-called smirk effect displayed when constant volatility models are used to price financial derivatives such as options. However, due to the increased model complexity, the associated computational effort usually increases as well, particularly when they are used to price American-style options. In this paper, a novel computational approach based on integral equations is presented. A distinctive feature of our approach, in comparison with ot...

An American option gives the holder the right, but not the obligation, to buy/sell an underlying asset from/to the writer at an agreed strike price at any time on or before the expiry date. Options are mainly used for speculation and hedging. The pricing of options is a fundamental problem in mathematical finance. One of the attractions of options is that they can be used to construct a wide range of trading strategies characterized by different payoff functions. As a preliminary step in the valuation of American options for a variety of trading strategies, in this article the pricing of perpe...