IMEX-MCNAB Scheme for Pricing European Options under Kou's Jump-Diffusion Models

DOI

10.2991/etmhs-18.2018.115How to use a DOI?

Keywords

implicit-explicit methods; linear multistep methods; jump-diffusion model; option pricing; Fourier stability analysis

Abstract

We consider IMEX-MCNAB time discretization scheme for the partial integro-differential equation derived for the pricing of options under a jump-diffusion process. The scheme is defined by a convex combination parameter, which divides the zeroth-order term due to the jumps between the implicit and explicit parts in the time discretization. This scheme is studied through Fourier stability analysis. It is found that, under suitable assumptions and time step restrictions, the IMEX-MCNAB scheme is conditionally stable. Numerical experiments show the effectiveness of the proposed method.

Copyright

© 2018, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Xiangyu Jia
AU  - Zuoliang Xu
PY  - 2018/04
DA  - 2018/04
TI  - IMEX-MCNAB Scheme for Pricing European Options under Kou's Jump-Diffusion Models
BT  - Proceedings of the 2018 4th International Conference on Education Technology, Management and Humanities Science (ETMHS 2018)
PB  - Atlantis Press
SP  - 545
EP  - 552
SN  - 2352-5398
UR  - https://doi.org/10.2991/etmhs-18.2018.115
DO  - 10.2991/etmhs-18.2018.115
ID  - Jia2018/04
ER  -