Year: 2021
Author: Ling-Xi Zhang, Ren-Feng Peng, Jun-Feng Yin
East Asian Journal on Applied Mathematics, Vol. 11 (2021), Iss. 2 : pp. 326–348
Abstract
A number of fractional option models (FMLS, CGMY, KoBol) are proposed and studied under assumption that the motion of the underlying assets follows a Lévy process. Numerical methods for these option pricing models are based on solution of fractional partial differential equations. To discretise them, we employ a second order numerical scheme and study its stability and convergence. Numerical experiments show the efficiency of the method and its convergence. Simulations related to practical stock markets, further confirm the robustness of the scheme and show that KoBol model has advantage over the classical Black-Scholes model.
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Journal Article Details
Publisher Name: Global Science Press
Language: English
DOI: https://doi.org/10.4208/eajam.020820.121120
East Asian Journal on Applied Mathematics, Vol. 11 (2021), Iss. 2 : pp. 326–348
Published online: 2021-01
AMS Subject Headings:
Copyright: COPYRIGHT: © Global Science Press
Pages: 23
Keywords: Lévy process fractional partial differential equation option pricing finite difference stock index option.
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