The numerical approximation of nonlinear Black--Scholes model for exotic path-dependent American options with transaction cost

DOI10.1080/00207160.2012.688115zbMATH Open1255.91434OpenAlexW2035253283MaRDI QIDQ4903545FDOQ4903545

Authors: B. Kleefeld, M. Yousuf, A. Q. M. Khaliq 

Publication date: 22 January 2013

Published in: International Journal of Computer Mathematics (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1080/00207160.2012.688115

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zbMATH Keywords

transaction costexponential time differencingdiscrete barrier optionbutterfly spreadnonlinear Black-Scholes model

Mathematics Subject Classification ID

Parallel numerical computation (65Y05) Complexity and performance of numerical algorithms (65Y20) Numerical methods (including Monte Carlo methods) (91G60) Stability and convergence of numerical methods for initial value and initial-boundary value problems involving PDEs (65M12) Error bounds for initial value and initial-boundary value problems involving PDEs (65M15)

Cites Work

• The pricing of options and corporate liabilities
• Nineteen Dubious Ways to Compute the Exponential of a Matrix, Twenty-Five Years Later
• Semigroups of linear operators and applications to partial differential equations
• Exponential time differencing for stiff systems
• Title not available (Why is that?)
• Quadratic convergence for valuing American options using a penalty method
• An ETD Crank-Nicolson method for reaction-diffusion systems
• A Fast Numerical Method for the Black--Scholes Equation of American Options
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• A FAST, STABLE AND ACCURATE NUMERICAL METHOD FOR THE BLACK–SCHOLES EQUATION OF AMERICAN OPTIONS
• On the risk-adjusted pricing-methodology-based valuation of vanilla options and explanation of the volatility smile
• Evaluation of American strangles
• Efficient \(L\)-stable method for parabolic problems with application to pricing American options under stochastic volatility
• High-order compact scheme for solving nonlinear Black–Scholes equation with transaction cost
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• On the Hoggard-Whalley-Wilmott equation for the pricing of options with transaction costs
• A high-order compact method for nonlinear Black-Scholes option pricing equations of American options
• Existence and stability of solutions for semi-linear parabolic systems, and applications to some diffusion reaction equations
• On smoothing of the Crank-Nicolson scheme and higher order schemes for pricing barrier options
• Absorbing boundary conditions for reaction-diffusion equations
• Numerical methods for non-linear Black-Scholes equations
• On parallel algorithms for semidiscretized parabolic partial differential equations based on subdiagonal Padé approximations
• A nonlinear approach to absorbing boundary conditions for the semilinear wave equation
• Analysis of the free boundary for the pricing of an American call option
• Smoothing properties and approximation of time derivatives for parabolic equations: constant time steps
• A new computational tool for analysing dynamic hedging under transaction costs

Cited In (26)

• Solving complex PIDE systems for pricing American option under multi-state regime switching jump-diffusion model
• Numerical simulations of multilingual competition dynamics with nonlocal derivative
• Exponential integrator methods for systems of non-linear space-fractional models with super-diffusion processes in pattern formation
• A fourth-order implicit-explicit scheme for the space fractional nonlinear Schrödinger equations
• A hybrid fourth order time stepping method for space distributed order nonlinear reaction-diffusion equations
• Pricing European and American options using a very fast and accurate scheme: the meshless local Petrov-Galerkin method
• Local weak form meshless techniques based on the radial point interpolation (RPI) method and local boundary integral equation (LBIE) method to evaluate European and American options
• Exponential time differencing Crank-Nicolson method with a quartic spline approximation for nonlinear Schrödinger equations
• Penalty and penalty-like methods for nonlinear HJB PDEs
• PRICING AMERICAN OPTION USING A MODIFIED FRACTIONAL BLACK–SCHOLES MODEL UNDER MULTI-STATE REGIME SWITCHING
• A second-order efficientL-stable numerical method for space fractional reaction–diffusion equations
• A second-order exponential time differencing scheme for non-linear reaction-diffusion systems with dimensional splitting
• A new method for evaluating options based on multiquadric RBF-FD method
• High-order time-stepping methods for two-dimensional Riesz fractional nonlinear reaction-diffusion equations
• Pricing American options under multi-state regime switching with an efficient \(L\)-stable method
• Pricing European and American options by radial basis point interpolation
• Fourth-order methods for space fractional reaction–diffusion equations with non-smooth data
• Decentralized time-constrained scheduling for sensor network in identification of distributed parameter systems
• Fourier spectral exponential time differencing methods for multi-dimensional space-fractional reaction-diffusion equations
• High-order time stepping scheme for pricing American option under Bates model
• High-order time stepping Fourier spectral method for multi-dimensional space-fractional reaction-diffusion equations
• A positivity-preserving numerical scheme for nonlinear option pricing models
• Efficient time discretization scheme for nonlinear space fractional reaction–diffusion equations
• An efficient finite element method for pricing American multi-asset put options
• Exponential time differencing schemes for the 3-coupled nonlinear fractional Schrödinger equation
• A real distinct poles exponential time differencing scheme for reaction-diffusion systems

Uses Software

• RODAS

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