A Jump-Diffusion Model for Option Pricing
Management Science
A penalty method for American options with jump diffusion processes
Numerische Mathematik
Numerical valuation of options with jumps in the underlying
Applied Numerical Mathematics
A Semi-Lagrangian Approach for American Asian Options under Jump Diffusion
SIAM Journal on Scientific Computing
Methods for the rapid solution of the pricing PIDEs in exponential and Merton models
Journal of Computational and Applied Mathematics
| Hi-index | 0.00 |
Because the pricing equations in Levy models contain integrals, it is difficult to develop rapid numerical methods for solving them. Although the integrals are not periodic, the standard evaluation methods use the FFT, and therefore require large computational regions to ensure accuracy. In earlier work, we developed efficient methods for pricing options in the Merton and Kou double exponential models. The methods rely on the fact that in those models the density functions satisfy ordinary or partial differential equations, so differential methods can be used to evaluate the integrals. In this paper, we present effective numerical methods for pricing options in another Levy model, the Variance Gamma model.