Variational Formulation of Option Pricing Problem a Platform for Finite Element Method in Finance

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DOI - Digital Object Identifier

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Jazyk výsledku

angličtina

Název v původním jazyce

Variational Formulation of Option Pricing Problem a Platform for Finite Element Method in Finance

Popis výsledku v původním jazyce

The paper deals with variational formulation of option pricing problems. We start from the well-known case, the Black-Scholes model for a put option with strike price and maturity given, which assumes the underlying asset to follow a geometric Brownian motion. This problem provides a reasonable basic framework to follow basic steps of derivation of variational formulation of option pricing problem. In general, variational formulation consists of finding a continuous function defined on the time intervalwith the values in a properly defined functional space. Finite element method applied to option pricing problem in finance yields usually a system of ordinary differential equations if discretization process applies to space domain of underlying asset only. However, we mention also full discretization scheme which is achieved using space-time formulated finite elements. Application of specified option pricing boundary conditions can be realized in various forms being dependent upon the

Název v anglickém jazyce

Variational Formulation of Option Pricing Problem a Platform for Finite Element Method in Finance

Popis výsledku anglicky

The paper deals with variational formulation of option pricing problems. We start from the well-known case, the Black-Scholes model for a put option with strike price and maturity given, which assumes the underlying asset to follow a geometric Brownian motion. This problem provides a reasonable basic framework to follow basic steps of derivation of variational formulation of option pricing problem. In general, variational formulation consists of finding a continuous function defined on the time intervalwith the values in a properly defined functional space. Finite element method applied to option pricing problem in finance yields usually a system of ordinary differential equations if discretization process applies to space domain of underlying asset only. However, we mention also full discretization scheme which is achieved using space-time formulated finite elements. Application of specified option pricing boundary conditions can be realized in various forms being dependent upon the

Druh

D - Stať ve sborníku

CEP obor

AH - Ekonomie

OECD FORD obor

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Projekt

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Návaznosti

S - Specificky vyzkum na vysokych skolach

Rok uplatnění

2015

Kód důvěrnosti údajů

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

Název statě ve sborníku

Conference Proceedings, 33th International Conference Mathematical Methods in Economics

ISBN

978-80-261-0539-8

ISSN

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e-ISSN

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Počet stran výsledku

6

Strana od-do

467-472

Název nakladatele

Západočeská univerzita v Plzni

Místo vydání

Plzeň

Místo konání akce

Cheb

Datum konání akce

9. 9. 2015

Typ akce podle státní příslušnosti

EUR - Evropská akce

Kód UT WoS článku

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