Optimal exercise boundary via intermediate function with jump risk

Beom Jin Kim; Yong Ki Ma; Hi Jun Choe

doi:10.1007/s13160-017-0261-0

Optimal exercise boundary via intermediate function with jump risk

Beom Jin Kim, Yong Ki Ma, Hi Jun Choe

Department of Mathematics

Research output: Contribution to journal › Article › peer-review

4 Citations (Scopus)

Abstract

In this paper, we present a simple numerical method to determine the optimal exercise boundary for American put option with jump risk. Our intermediate function obtained by the partial integro-differential equation can easily determine the optimal exercise boundary. We use finite difference method characterized by explicit scheme in continuation region and extrapolation near optimal exercise boundary. Finally, we present several numerical results which illustrate comparison to other methods.

Original language	English
Pages (from-to)	779-792
Number of pages	14
Journal	Japan Journal of Industrial and Applied Mathematics
Volume	34
Issue number	3
DOIs	https://doi.org/10.1007/s13160-017-0261-0
Publication status	Published - 2017 Nov 1

Bibliographical note

Funding Information:
This work was supported by the research grant of the Kongju National University in 2015.

Publisher Copyright:
© 2017, The JJIAM Publishing Committee and Springer Japan KK.

All Science Journal Classification (ASJC) codes

Engineering(all)
Applied Mathematics

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10.1007/s13160-017-0261-0

Cite this

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abstract = "In this paper, we present a simple numerical method to determine the optimal exercise boundary for American put option with jump risk. Our intermediate function obtained by the partial integro-differential equation can easily determine the optimal exercise boundary. We use finite difference method characterized by explicit scheme in continuation region and extrapolation near optimal exercise boundary. Finally, we present several numerical results which illustrate comparison to other methods.",

author = "Kim, {Beom Jin} and Ma, {Yong Ki} and Choe, {Hi Jun}",

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Optimal exercise boundary via intermediate function with jump risk

Abstract

Bibliographical note

All Science Journal Classification (ASJC) codes

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