On convergence of Laplace inversion for the American put option under the CEV model

Sihun Jo; Minsuk Yang; Geonwoo Kim

doi:10.1016/j.cam.2016.03.030

On convergence of Laplace inversion for the American put option under the CEV model

Sihun Jo, Minsuk Yang, Geonwoo Kim

Department of Mathematics

Research output: Contribution to journal › Article › peer-review

8 Citations (Scopus)

Abstract

In this paper, we study the convergence of the inverse Laplace transform for valuing American put options when the dynamics of the risky asset is governed by the constant elasticity of variance (CEV) model. The CEV model is one popular alternative of the Black-Scholes model to describe well the real financial market. We calculate various coefficients explicitly and prove that the inverse Laplace transform converges absolutely using the properties of Whittaker functions.

Original language	English
Pages (from-to)	36-43
Number of pages	8
Journal	Journal of Computational and Applied Mathematics
Volume	305
DOIs	https://doi.org/10.1016/j.cam.2016.03.030
Publication status	Published - 2016 Oct 15

Bibliographical note

Funding Information:
The research of Jo was supported by the National Research Foundation of Korea grant funded by the Korea government (MSIP) ( NRF-2015R1C1A1A01053719 ). The research of Kim was supported by the National Research Foundation of Korea grant funded by the Korea government (MSIP) ( NRF-2015R1C1A1A02037533 ) and BK21 PLUS SNU Mathematical Sciences Division.

Publisher Copyright:
© 2016 Elsevier B.V. All rights reserved.

All Science Journal Classification (ASJC) codes

Computational Mathematics
Applied Mathematics

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10.1016/j.cam.2016.03.030

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abstract = "In this paper, we study the convergence of the inverse Laplace transform for valuing American put options when the dynamics of the risky asset is governed by the constant elasticity of variance (CEV) model. The CEV model is one popular alternative of the Black-Scholes model to describe well the real financial market. We calculate various coefficients explicitly and prove that the inverse Laplace transform converges absolutely using the properties of Whittaker functions.",

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AU - Yang, Minsuk

AU - Kim, Geonwoo

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PY - 2016/10/15

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N2 - In this paper, we study the convergence of the inverse Laplace transform for valuing American put options when the dynamics of the risky asset is governed by the constant elasticity of variance (CEV) model. The CEV model is one popular alternative of the Black-Scholes model to describe well the real financial market. We calculate various coefficients explicitly and prove that the inverse Laplace transform converges absolutely using the properties of Whittaker functions.

AB - In this paper, we study the convergence of the inverse Laplace transform for valuing American put options when the dynamics of the risky asset is governed by the constant elasticity of variance (CEV) model. The CEV model is one popular alternative of the Black-Scholes model to describe well the real financial market. We calculate various coefficients explicitly and prove that the inverse Laplace transform converges absolutely using the properties of Whittaker functions.

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On convergence of Laplace inversion for the American put option under the CEV model

Abstract

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