An iterative method for pricing American options under jump-diffusion models
نویسندگان
چکیده
منابع مشابه
An Iterative Method for Pricing American Options under Jump-Diffusion Models
We propose an iterative method for pricing American options under jumpdiffusion models. A finite difference discretization is performed on the partial integro-differential equation, and the American option pricing problem is formulated as a linear complementarity problem (LCP). Jump-diffusion models include an integral term, which causes the resulting system to be dense. We propose an iteration...
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European options can be priced by solving parabolic partial(-integro) differential equations under stochastic volatility and jump-diffusion models like Heston, Merton, and Bates models. American option prices can be obtained by solving linear complementary problems (LCPs) with the same operators. A finite difference discretization leads to a so-called full order model (FOM). Reduced order model...
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ژورنال
عنوان ژورنال: Applied Numerical Mathematics
سال: 2011
ISSN: 0168-9274
DOI: 10.1016/j.apnum.2011.02.002