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

• Autorzy: Rafael Company , Lucas Jódar , Enrique Ponsoda
• Języki publikacji: EN

Abstrakty

EN

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.

Kategorie tematyczne

• 91B24: Price theory and market structure
• 03H10: Other applications of nonstandard models (economics, physics, etc.)
• 35K15: Initial value problems for second-order parabolic equations

• Wydawca: Institute of Mathematics Polish Academy of Sciences
• Czasopismo: Banach Center Publications
• Rocznik: 2008
• Tom: 83
• Numer: 1
• Strony: 37-47

Daty

wydano

2008

Twórcy

autor

Rafael Company

• Instituto de Matemática Multidisciplinar, Edificio 8G, Universidad Politécnica de Valencia, Camino de Vera s/n, 46022 Valencia, Spain

autor

Lucas Jódar

• Instituto de Matemática Multidisciplinar, Edificio 8G, Universidad Politécnica de Valencia, Camino de Vera s/n, 46022 Valencia, Spain

autor

Enrique Ponsoda

• Instituto de Matemática Multidisciplinar, Edificio 8G, Universidad Politécnica de Valencia, Camino de Vera s/n, 46022 Valencia, Spain

Identyfikatory

DOI

10.4064/bc83-0-3