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Displaying similar documents to “DGM for real options valuation: Options to change operating scale”

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...

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 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...

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...

Using Monte Carlo Methods to Evaluate Sub-Optimal Exercise Policies for American Options

Alobaidi, Ghada, Mallier, Roland (2002)

Serdica Mathematical Journal

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∗This research, which was funded by a grant from the Natural Sciences and Engineering Research Council of Canada, formed part of G.A.’s Ph.D. thesis [1]. In this paper we use a Monte Carlo scheme to find the returns that an uninformed investor might expect from an American option if he followed one of several näıve exercise strategies rather than the optimal exercise strategy. We consider several such strategies that an ill-advised investor might follow. We also consider...