Finite difference methods for option pricing under Lévy processes: Wiener-Hopf factorization approach.
In the paper, we consider the problem of pricing options in wide classes of Lévy processes. We propose a general approach to the numerical methods based on a finite difference approximation for the generalized Black-Scholes equation. The goal of the paper is to incorporate the Wiener-Hopf factorizat...
| Publicado en: | Scientific World Journal pp. 963625 - 963626 |
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| Autor principal: | |
| Formato: | Journal Article |
| Publicado: |
Wiley-Blackwell
2013
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| Acceso en línea: | Ver este registro en EBSCOhost |
| fields | @attributes: recordID: 1 pdfLink: plink: https://search.ebscohost.com/login.aspx?direct=true&db=ccm&AN=104016638&site=ehost-live header: @attributes: shortDbName: ccm uiTerm: 104016638 longDbName: CINAHL Complete uiTag: AN controlInfo: bkinfo: dissinfo: jinfo: jid: 1537744X 1BX5 jtl: Scientific World Journal issn: 1537744X maglogo: N pubinfo: dt: 2013 pid: 480 pub: Wiley-Blackwell place: Malden, Massachusetts artinfo: ui: 104016638 NLM24489518 2012462047 10.1155/2013/963625 NLM24489518 PMC3893018 104016638 ppf: 963625 ppct: 1 formats: tig: atl: Finite difference methods for option pricing under Lévy processes: Wiener-Hopf factorization approach. aug: au: Kudryavtsev, Oleg affil: Department of Informatics, Russian Customs Academy Rostov Branch, Budennovskiy 20, Rostov-on-Don 344002, Russia ; Faculty of Mathematics, Mechanics and Computer Science, Southern Federal University, Miltchakova 8A, Rostov-on-Don 344090, Russia. sug: subj: Models, Theoretical ab: In the paper, we consider the problem of pricing options in wide classes of Lévy processes. We propose a general approach to the numerical methods based on a finite difference approximation for the generalized Black-Scholes equation. The goal of the paper is to incorporate the Wiener-Hopf factorization into finite difference methods for pricing options in Lévy models with jumps. The method is applicable for pricing barrier and American options. The pricing problem is reduced to the sequence of linear algebraic systems with a dense Toeplitz matrix; then the Wiener-Hopf factorization method is applied. We give an important probabilistic interpretation based on the infinitely divisible distributions theory to the Laurent operators in the correspondent factorization identity. Notice that our algorithm has the same complexity as the ones which use the explicit-implicit scheme, with a tridiagonal matrix. However, our method is more accurate. We support the advantage of the new method in terms of accuracy and convergence by using numerical experiments. pubtype: Academic Journal doctype: Journal Article ougenre: Article language: English refInfo: holdings: @attributes: islocal: N |
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