Option Pricing under the Kou Jump-Diffusion Model: a DG Approach

Kód výsledku v IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F46747885%3A24510%2F19%3A00008639" target="_blank" >RIV/46747885:24510/19:00008639 - isvavai.cz</a>

Nalezeny alternativní kódy

RIV/61989100:27510/19:10243826

Výsledek na webu

<a href="https://aip.scitation.org/doi/10.1063/1.5133547" target="_blank" >https://aip.scitation.org/doi/10.1063/1.5133547</a>

DOI - Digital Object Identifier

<a href="http://dx.doi.org/10.1063/1.5133547" target="_blank" >10.1063/1.5133547</a>

Jazyk výsledku

angličtina

Název v původním jazyce

Option Pricing under the Kou Jump-Diffusion Model: a DG Approach

Popis výsledku v původním jazyce

More empiricism in modelling of option contracts is obtained when the jump-diffusion models are employed. Such models extend the standard Black-Scholes framework by adding jumps to the dynamics of underlying asset prices and enable to describe large and sudden changes in the underlying. The paper is devoted to the discontinuous Galerkin method applied to European option pricing under the Kou model where jump sizes are double exponentially distributed. The pricing function satisfies a partial integro-differential equation, which involves both integrals and derivatives of an unknown option value function. With a localization to a bounded spatial domain, the governing equation is discretized by the discontinuous Galerkin method over a finite element mesh and it is integrated in temporal variable by a semi-implicit Euler scheme, where the differential part is treated implicitly while the integral one explicitly by the composite trapezoidal rule. This approach thus leads to a sparse linear algebraic system at each time level. Finally, numerical results demonstrate the capability of the scheme presented within the reference benchmarks.

Název v anglickém jazyce

Option Pricing under the Kou Jump-Diffusion Model: a DG Approach

Popis výsledku anglicky

More empiricism in modelling of option contracts is obtained when the jump-diffusion models are employed. Such models extend the standard Black-Scholes framework by adding jumps to the dynamics of underlying asset prices and enable to describe large and sudden changes in the underlying. The paper is devoted to the discontinuous Galerkin method applied to European option pricing under the Kou model where jump sizes are double exponentially distributed. The pricing function satisfies a partial integro-differential equation, which involves both integrals and derivatives of an unknown option value function. With a localization to a bounded spatial domain, the governing equation is discretized by the discontinuous Galerkin method over a finite element mesh and it is integrated in temporal variable by a semi-implicit Euler scheme, where the differential part is treated implicitly while the integral one explicitly by the composite trapezoidal rule. This approach thus leads to a sparse linear algebraic system at each time level. Finally, numerical results demonstrate the capability of the scheme presented within the reference benchmarks.

Druh

D - Stať ve sborníku

CEP obor

—

OECD FORD obor

10102 - Applied mathematics

Projekt

—

Návaznosti

I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace

Rok uplatnění

2019

Kód důvěrnosti údajů

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Název statě ve sborníku

AIP Conference Proceedings

ISBN

978-0-7354-1919-3

ISSN

0094-243X

e-ISSN

—

Počet stran výsledku

8

Strana od-do

—

Název nakladatele

American Institute of Physics

Místo vydání

Melville

Místo konání akce

Sozopol

Datum konání akce

1. 1. 2019

Typ akce podle státní příslušnosti

EUR - Evropská akce

Kód UT WoS článku

000521744400065