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A FAST AND ROBUST NUMERICAL METHOD FOR OPTION PRICES AND GREEKS IN A JUMP-DIFFUSION MODEL
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  • Journal title : The Pure and Applied Mathematics
  • Volume 22, Issue 2,  2015, pp.159-168
  • Publisher : Korea Society of Mathematical Education
  • DOI : 10.7468/jksmeb.2015.22.2.159
 Title & Authors
A FAST AND ROBUST NUMERICAL METHOD FOR OPTION PRICES AND GREEKS IN A JUMP-DIFFUSION MODEL
JEONG, DARAE; KIM, YOUNG ROCK; LEE, SEUNGGYU; CHOI, YONGHO; LEE, WOONG-KI; SHIN, JAE-MAN; AN, HYO-RIM; HWANG, HYEONGSEOK; KIM, HJUNSEOK;
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 Abstract
Abstract. We propose a fast and robust finite difference method for Merton`s jump diffusion model, which is a partial integro-differential equation. To speed up a computational time, we compute a matrix so that we can calculate the non-local integral term fast by a simple matrix-vector operation. Also, we use non-uniform grids to increase efficiency. We present numerical experiments such as evaluation of the option prices and Greeks to demonstrate a performance of the proposed numerical method. The computational results are in good agreements with the exact solutions of the jump-diffusion model.
 Keywords
jump-diffusion;Simpson`s rule;non-uniform grid;implicit finite difference method;derivative securities.;
 Language
English
 Cited by
 References
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