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Numerical solution of Black-Scholes option pricing with variable yield discrete dividend payment

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Company R., Jódar L., Ponsoda E.

Banach Center Publications

2008

tom 83

nr 1

37-47

This paper deals with the construction of numerical solution of the Black-Scholes (B-S) type equation modeling option pricing with variable yield discrete dividend payment at time $t_{d}$. Firstly the shifted delta generalized function $δ(t-t_{d})$ appearing in the B-S equation is approximated by an appropriate sequence of nice ordinary functions. Then a semidiscretization technique applied on the underlying asset is used to construct a numerical solution. The limit of this numerical solution is independent of the considered sequence of the nice type. Illustrative examples including the comparison with the exact solution recently given in [2] for the case of constant yield discrete dividend payment are presented.

Ograniczanie wyników

1 Banach Center Publications

1 Company R.

1 Jódar L.

1 Ponsoda E.

1 2008

Wyniki wyszukiwania

Numerical solution of Black-Scholes option pricing with variable yield discrete dividend payment