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| Tekijä: | Carr, P. Mayo, A. |
| Otsikko: | On the numerical evaluation of option prices in jump diffusion processes |
| Lehti: | European Journal of Finance
2007 : APR/JUN, VOL. 13:3-4, p. 353-372 |
| Asiasana: | securities options pricing mathematical models |
| Kieli: | eng |
| Tiivistelmä: | The fair price of a financial option on an asset following a Poisson jump diffusion process satisfies a partial integro-differential equation. The integrals are usually evaluated using either quadrature methods or fast Fourier methods to solve such equations etc. This paper presents a different and more efficient class of methods, based on the fact that the integrals often satisfy differential equations (here as: d-eqs.), either ordinary d-eqs. or parabolic partial d-eqs. Both types of equations can be accurately solved rapidly. The methods are discussed and results are presented with numerical experiments. |
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