Optimal exercise boundary via intermediate function with jump risk

Beom Jin Kim, Yong Ki Ma, Hi Jun Choe

Research output: Contribution to journalArticle

Abstract

In this paper, we present a simple numerical method to determine the optimal exercise boundary for American put option with jump risk. Our intermediate function obtained by the partial integro-differential equation can easily determine the optimal exercise boundary. We use finite difference method characterized by explicit scheme in continuation region and extrapolation near optimal exercise boundary. Finally, we present several numerical results which illustrate comparison to other methods.

Original languageEnglish
Pages (from-to)779-792
Number of pages14
JournalJapan Journal of Industrial and Applied Mathematics
Volume34
Issue number3
DOIs
Publication statusPublished - 2017 Nov 1

All Science Journal Classification (ASJC) codes

  • Engineering(all)
  • Applied Mathematics

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