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Option valuation under the VG process by a DG method

Jiří Hozman, Tomáš Tichý (2021)

Applications of Mathematics

The paper presents a discontinuous Galerkin method for solving partial integro-differential equations arising from the European as well as American option pricing when the underlying asset follows an exponential variance gamma process. For practical purposes of numerical solving we introduce the modified option pricing problem resulting from a localization to a bounded domain and an approximation of small jumps, and we discuss the related error estimates. Then we employ a robust numerical procedure...

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