Option valuation under the VG process by a DG method

Jiří Hozman; Tomáš Tichý

Displaying similar documents to “Option valuation under the VG process by a DG method”

DG method for pricing European options under Merton jump-diffusion model

Jiří Hozman, Tomáš Tichý, Miloslav Vlasák (2019)

Applications of Mathematics

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Under real market conditions, there exist many cases when it is inevitable to adopt numerical approximations of option prices due to non-existence of analytical formulae. Obviously, any numerical technique should be tested for the cases when the analytical solution is well known. The paper is devoted to the discontinuous Galerkin method applied to European option pricing under the Merton jump-diffusion model, when the evolution of the asset prices is driven by a Lévy process with finite...

Consistent stable difference schemes for nonlinear Black-Scholes equations modelling option pricing with transaction costs

Rafael Company, Lucas Jódar, José-Ramón Pintos (2009)

ESAIM: Mathematical Modelling and Numerical Analysis

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This paper deals with the numerical solution of nonlinear Black-Scholes equation modeling European vanilla call option pricing under transaction costs. Using an explicit finite difference scheme consistent with the partial differential equation valuation problem, a sufficient condition for the stability of the solution is given in terms of the stepsize discretization variables and the parameter measuring the transaction costs. This stability condition is linked to some properties of...

Valuing barrier options using the adaptive discontinuous Galerkin method

Hozman, Jiří

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This paper is devoted to barrier options and the main objective is to develop a sufficiently robust, accurate and efficient method for computation of their values driven according to the well-known Black-Scholes equation. The main idea is based on the discontinuous Galerkin method together with a spatial adaptive approach. This combination seems to be a promising technique for the solving of such problems with discontinuous solutions as well as for consequent optimization of the number...

DG method for the numerical pricing of two-asset European-style Asian options with fixed strike

Jiří Hozman, Tomáš Tichý (2017)

Applications of Mathematics

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The evaluation of option premium is a very delicate issue arising from the assumptions made under a financial market model, and pricing of a wide range of options is generally feasible only when numerical methods are involved. This paper is based on our recent research on numerical pricing of path-dependent multi-asset options and extends these results also to the case of Asian options with fixed strike. First, we recall the three-dimensional backward parabolic PDE describing the evolution...

Numerical solution of a new hydrodynamic model of flocking

Kučera, Václav, Živčáková, Andrea

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This work is concerned with the numerical solution of a hydrodynamic model of the macroscopic behavior of flocks of birds due to Fornasier et al., 2011. The model consists of the compressible Euler equations with an added nonlocal, nonlinear right-hand side. As noticed by the authors of the model, explicit time schemes are practically useless even on very coarse grids in 1D due to the nonlocal nature of the equations. To this end, we apply a semi-implicit discontinuous Galerkin method...

DG method for numerical pricing of multi-asset Asian options—the case of options with floating strike

Jiří Hozman, Tomáš Tichý (2017)

Applications of Mathematics

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Option pricing models are an important part of financial markets worldwide. The PDE formulation of these models leads to analytical solutions only under very strong simplifications. For more general models the option price needs to be evaluated by numerical techniques. First, based on an ideal pure diffusion process for two risky asset prices with an additional path-dependent variable for continuous arithmetic average, we present a general form of PDE for pricing of Asian option contracts...