Pricing European continuous-installment strangle options

Jeon, Junkee; Kim, Geonwoo

doi:10.1016/j.najef.2019.101049

Cited by 4 publications

(1 citation statement)

References 19 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…By utilizing the recursive integration method (RIM) proposed by Huang et al [29], we can obtain the numerical solution for the coupled integral equation of Z up (t) and Z low (t) in Theorem 1. The detailed procedures for the numerical algorithm to solve the coupled integral equation are well documented in [30,31]. All experiments were implemented using Matlab on a personal computer with Intel(R) Core(TM) i7-6700 CPU.…”

Section: Numerical Resultsmentioning

confidence: 99%

Analytic Valuation Formula for American Strangle Option in the Mean-Reversion Environment

Jeon

Kim

2022

Mathematics

Self Cite

View full text Add to dashboard Cite

This paper investigates the American strangle option in a mean-reversion environment. When the underlying asset follows a mean-reverting lognormal process, an analytic pricing formula for an American strangle option is explicitly provided. To present the pricing formula, we consider the partial differential equation (PDE) for American strangle options with two optimal stopping boundaries and use Mellin transform techniques to derive the integral equation representation formula arising from the PDE. A Monte Carlo simulation is used as a benchmark to validate the formula’s accuracy and efficiency. In addition, the numerical examples are provided to demonstrate the effects of the mean-reversion on option prices and the characteristics of options with respect to several significant parameters.

show abstract

Section: Numerical Resultsmentioning

confidence: 99%

Analytic Valuation Formula for American Strangle Option in the Mean-Reversion Environment

Jeon

Kim

2022

Mathematics

Self Cite

View full text Add to dashboard Cite

show abstract

A finite element method for pricing of continuous-installment options under a Markov-modulated model: existence, uniqueness, and stability of solutions

Heidari

2023

Soft Comput

View full text Add to dashboard Cite

In this paper, we apply Markov-modulated models to value continuous-installment options of European style with partial differential equation approach. Under regime switching models and the opportunity for continuing or stopping to pay installments, the valuation problem can be formulated as coupled partial differential equations (CPDE) with free boundary features, which in many ways is similar to the free boundary problem for vanilla American options due to the possibility of early exercise. In this paper to value the continuous-installment options under the proposed model with numerical approach, we first express the truncated CPDE as a linear complementarity problem (LCP), then a finite element method is applied to solve the resulting variational inequality. Under some appropriate assumptions, we establish the stability of the method and illustrate some numerical results to examine the rate of convergence and accuracy of the proposed method for the pricing problem under regime-switching model.

show abstract

Pricing European continuous-installment currency options with mean-reversion

Jeon

Kim

2022

The North American Journal of Economics and Finance

View full text Add to dashboard Cite

Pricing European continuous-installment strangle options

Cited by 4 publications

References 19 publications

Analytic Valuation Formula for American Strangle Option in the Mean-Reversion Environment

Analytic Valuation Formula for American Strangle Option in the Mean-Reversion Environment

A finite element method for pricing of continuous-installment options under a Markov-modulated model: existence, uniqueness, and stability of solutions

Pricing European continuous-installment currency options with mean-reversion

Contact Info

Product

Resources

About