Company Rossi, R.; Egorova, V.; Jódar Sánchez, LA. (2016). Constructing positive reliable numerical solution for American call options: a new front-fixing approach. Journal of Computational and Applied Mathematics. 291:422-431. https://doi.org/10.1016/j.cam.2014.09.013
Por favor, use este identificador para citar o enlazar este ítem: http://hdl.handle.net/10251/84124
Title:
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Constructing positive reliable numerical solution for American call options: a new front-fixing approach
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Author:
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Company Rossi, Rafael
Egorova, Vera
Jódar Sánchez, Lucas Antonio
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UPV Unit:
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Universitat Politècnica de València. Escuela Técnica Superior de Ingenieros de Caminos, Canales y Puertos - Escola Tècnica Superior d'Enginyers de Camins, Canals i Ports
Universitat Politècnica de València. Instituto Universitario de Matemática Multidisciplinar - Institut Universitari de Matemàtica Multidisciplinària
Universitat Politècnica de València. Facultad de Administración y Dirección de Empresas - Facultat d'Administració i Direcció d'Empreses
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Issued date:
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Abstract:
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[EN] A new front-fixing transformation is applied to the Black Scholes equation for the American call option pricing problem. The transformed non-linear problem involves homogeneous boundary conditions independent of the ...[+]
[EN] A new front-fixing transformation is applied to the Black Scholes equation for the American call option pricing problem. The transformed non-linear problem involves homogeneous boundary conditions independent of the free boundary. The numerical solution by an explicit finite-difference method is positive and monotone. Stability and consistency of the scheme are studied. The explicit proposed method is compared with other competitive implicit ones from the points of view accuracy and computational cost.
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Subjects:
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American call option pricing
,
Finite difference scheme
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Front-fixing transformation
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Numerical analysis
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Positivity
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Copyrigths:
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Reserva de todos los derechos
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Source:
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Journal of Computational and Applied Mathematics. (issn:
0377-0427
) (eissn:
1879-1778
)
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DOI:
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10.1016/j.cam.2014.09.013
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Publisher:
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Elsevier
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Publisher version:
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http://dx.doi.org/10.1016/j.cam.2014.09.013
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Project ID:
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info:eu-repo/grantAgreement/EC/FP7/304617/EU
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Thanks:
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This paper has been partially supported by the European Union in the FP7-PEOPLE-2012-ITN program under Grant Agreement Number 304617 (FP7 Marie Curie Action, Project Multi-ITN STRIKE-Novel Methods in Computational Finance).[+]
This paper has been partially supported by the European Union in the FP7-PEOPLE-2012-ITN program under Grant Agreement Number 304617 (FP7 Marie Curie Action, Project Multi-ITN STRIKE-Novel Methods in Computational Finance).
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Type:
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Artículo
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