DG method for numerical option pricing under the merton short rate model

Kód výsledku v IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F61989100%3A27510%2F21%3A10247514" target="_blank" >RIV/61989100:27510/21:10247514 - isvavai.cz</a>

Nalezeny alternativní kódy

RIV/46747885:24510/21:00009602

Výsledek na webu

<a href="https://www.scopus.com/record/display.uri?eid=2-s2.0-85102729462&origin=resultslist" target="_blank" >https://www.scopus.com/record/display.uri?eid=2-s2.0-85102729462&origin=resultslist</a>

DOI - Digital Object Identifier

<a href="http://dx.doi.org/10.1063/5.0041933" target="_blank" >10.1063/5.0041933</a>

Jazyk výsledku

angličtina

Název v původním jazyce

DG method for numerical option pricing under the merton short rate model

Popis výsledku v původním jazyce

One of the possible improvements of the classical Black-Scholes option pricing model is to incorporate the stochastic nature of the short rate dynamics in option valuation. In this paper, we present the numerical scheme, based on the discontinuous Galerkin method, for European option pricing when the short rate follows the Merton model. The pricing function satisfies a partial differential equation with two underlying variables-stock price and short rate value. With a localization to a bounded spatial domain, including setting the proper boundary conditions, the governing equation is discretized by the discontinuous Galerkin method over a finite element grid and Crank-Nicolson time integration is applied, consequently. As a result the numerical scheme is represented by a sequence of linear algebraic systems with sparse matrices. Moreover, the numerical simulations reflect the capability of the scheme presented. (C) 2021 Author(s).

Název v anglickém jazyce

DG method for numerical option pricing under the merton short rate model

Popis výsledku anglicky

One of the possible improvements of the classical Black-Scholes option pricing model is to incorporate the stochastic nature of the short rate dynamics in option valuation. In this paper, we present the numerical scheme, based on the discontinuous Galerkin method, for European option pricing when the short rate follows the Merton model. The pricing function satisfies a partial differential equation with two underlying variables-stock price and short rate value. With a localization to a bounded spatial domain, including setting the proper boundary conditions, the governing equation is discretized by the discontinuous Galerkin method over a finite element grid and Crank-Nicolson time integration is applied, consequently. As a result the numerical scheme is represented by a sequence of linear algebraic systems with sparse matrices. Moreover, the numerical simulations reflect the capability of the scheme presented. (C) 2021 Author(s).

Druh

D - Stať ve sborníku

CEP obor

—

OECD FORD obor

50200 - Economics and Business

Projekt

—

Návaznosti

S - Specificky vyzkum na vysokych skolach

Rok uplatnění

2021

Kód důvěrnosti údajů

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

Název statě ve sborníku

AIP Conference Proceedings. Volume 2333

ISBN

978-0-7354-4077-7

ISSN

0094-243X

e-ISSN

1551-7616

Počet stran výsledku

10

Strana od-do

—

Název nakladatele

American Institute of Physics

Místo vydání

Melville

Místo konání akce

Sofie

Datum konání akce

7. 6. 2020

Typ akce podle státní příslušnosti

WRD - Celosvětová akce

Kód UT WoS článku

000664205600082