A Hybrid Finite Difference Method for Pricing Two-Asset Double Barrier Options
| Autor: | Shih-Yu Shen, Yi-Long Hsiao, Andrew Ming-Long Wang |
|---|---|
| Rok vydání: | 2015 |
| Předmět: |
Mathematical optimization
Partial differential equation Article Subject Laplace transform lcsh:Mathematics General Mathematics General Engineering Finite difference method hp-FEM Finite difference coefficient Mixed finite element method lcsh:QA1-939 Rate of convergence lcsh:TA1-2040 Finite difference methods for option pricing lcsh:Engineering (General). Civil engineering (General) Mathematics |
| Zdroj: | Mathematical Problems in Engineering, Vol 2015 (2015) |
| ISSN: | 1563-5147 1024-123X |
| Popis: | The pricing of the two-asset double barrier option is modeled as an initial-boundary value problem of the two-dimensional Black-Scholes partial differential equation. We use the hybrid finite different method to solve the problem. The hybrid method is a combination of the Laplace transform and a finite difference method. It is more efficient than a traditional finite difference method to obtain a solution without a step-by-step process. The method is implemented on a computer. Two numerical examples are calculated to verify the performance of the hybrid method. In our numerical examples, the convergence rate of the method is approximately two. We conclude that the method is efficient for pricing two-asset barrier options. |
| Databáze: | OpenAIRE |
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