Asset pricing for an affine jump-diffusion model using an FD method of lines on nonuniform meshes

[ X ]

Tarih

2019

Dergi Başlığı

Dergi ISSN

Cilt Başlığı

Yayıncı

Wiley

Erişim Hakkı

info:eu-repo/semantics/closedAccess

Özet

We present a novel numerical scheme for the valuation of options under a well-known jump-diffusion model. European option pricing for such a case satisfies a 1 + 2 partial integro-differential equation (PIDE) including a double integral term, which is nonlocal. The proposed approach relies on nonuniform meshes with a focus on the discontinuous and degenerate areas of the model and applying quadratically convergent finite difference (FD) discretizations via the method of lines (MOL). A condition for observing the time stability of the fully discretized problem is given. Also, we report results of numerical experiments.

Açıklama

Anahtar Kelimeler

asset pricing, computational methods, double integral, FD method, jump diffusion

Kaynak

Mathematical Methods in The Applied Sciences

WoS Q Değeri

Q2

Scopus Q Değeri

Q1

Cilt

42

Sayı

2

Künye