A note on the treatment of boundary conditions for the vanilla option pricing problem discretized by DG method

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F61989100%3A27510%2F14%3A86090777" target="_blank" >RIV/61989100:27510/14:86090777 - isvavai.cz</a>
Alternative codes found
RIV/46747885:24510/14:#0001180
Result on the web
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DOI - Digital Object Identifier
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Result language
angličtina
Original language name
A note on the treatment of boundary conditions for the vanilla option pricing problem discretized by DG method
Original language description
The valuation of a wide range of option contracts using the different financial models has acquired increasing popularity in modern financial theory and practice. This paper is dedicated to the plain vanilla option pricing problem, driven according to the one-dimensional Black- Scholes equation, and the main attention is paid to the treatment of boundary conditions. The whole system is discretized by the discontinuous Galerkin method combined with the implicit Euler scheme for the temporal discretization. Three concepts of boundary conditions are mentioned here such as Dirichlet, Neumann and transparent boundary condition. Moreover, their influence on the approximate solution together with the localization of an underlying asset and a strike price is studied. The preliminary numerical results are presented on real data of options on German DAX index obtained for 15SEPT2011 with implied volatilities and compared for the different treatments of boundary conditions to each other.
Czech name
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Czech description
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Project
Result was created during the realization of more than one project. More information in the Projects tab.
Continuities
P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)<br>S - Specificky vyzkum na vysokych skolach

Publication year
2014
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Article name in the collection
Managing and Modeling of Financial Risks : 7th international scientific conference : proceedings : 8th-9th September 2014, Ostrava, Czech Republic. [Part I-III]
ISBN
978-80-248-3631-7
ISSN
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e-ISSN
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Number of pages
9
Pages from-to
282-290
Publisher name
VŠB-Technical University of Ostrava
Place of publication
Ostrava
Event location
Ostrava
Event date
Sep 8, 2014
Type of event by nationality
EUR - Evropská akce
UT code for WoS article
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