Numerical Solution of American Put Options Pricing with Transaction Cost in the CEV Model

DOI

10.2991/icetis-13.2013.117How to use a DOI?

Keywords

Option Pricing; American Options; CEV Process; Transaction Cost; Semidiscretization

Abstract

In order to solve the American put options pricing and its numerical solution problems under the CEV model with transaction cost, by using the Itô formula and the no-arbitrage principle, the American put options pricing model and linear complementarity partial differential equation of the model are derived in this paper. Then the semi-discretization difference scheme for the American put options pricing model is developed, based on using semi-discretization for the spatial variable. Lastly, numerical experiments show that the semi-discretization difference scheme is a stable and convergent algorithm.

Copyright

© 2013, 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/).

Download article (PDF)

TY  - CONF
AU  - Guojun Yuan
AU  - Qingxian Xiao
PY  - 2013/06
DA  - 2013/06
TI  - Numerical Solution of American Put Options Pricing with Transaction Cost in the CEV Model
BT  - Proceedings of the 2013 the International Conference on Education Technology and Information System (ICETIS 2013)
PB  - Atlantis Press
SP  - 522
EP  - 525
SN  - 1951-6851
UR  - https://doi.org/10.2991/icetis-13.2013.117
DO  - 10.2991/icetis-13.2013.117
ID  - Yuan2013/06
ER  -