Share This Article:

An Implicit-Explicit Computational Method Based on Time Semi-Discretization for Pricing Financial Derivatives with Jumps

Full-Text HTML XML Download Download as PDF (Size:343KB) PP. 334-344
DOI: 10.4236/ojs.2018.82022    248 Downloads   449 Views
Author(s)

ABSTRACT

This paper considers pricing European options under the well-known of SVJ model of Bates and related computational methods. According to the no-arbitrage principle, we first derive a partial differential equation that the value of any European contingent claim should satisfy, where the asset price obeys the SVJ model. This equation is numerically solved by using the implicit- explicit backward difference method and time semi-discretization. In order to explain the validity of our method, the stability of time semi-discretization scheme is also proved. Finally, we use a simulation example to illustrate the efficiency of the method.

Cite this paper

Wang, Y. (2018) An Implicit-Explicit Computational Method Based on Time Semi-Discretization for Pricing Financial Derivatives with Jumps. Open Journal of Statistics, 8, 334-344. doi: 10.4236/ojs.2018.82022.

Copyright © 2019 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.