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Pricing Financial Instruments: The Finite Difference Method
Curt Randall,Domingo Tavella +1 more
TLDR
The Pricing Equations. as mentioned in this paper and the Finite-difference method are the most commonly used methods for finite difference methods in the literature, and they can be found in:Abstract:
The Pricing Equations. Analysis of Finite Difference Methods. Special Issues. Coordinate Transformations. Numerical Examples. Index.read more
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Journal ArticleDOI
The Theta-notation for Stochastic Processes
TL;DR: In this article, the authors present a notation for stochastic processes that is based on the foundation of operator theory, and define operators that evaluate the expected value of an argument function under the future state of the process.
Journal ArticleDOI
Numerical Solution of European and American Option with Dividends using Finite Difference Methods
TL;DR: In this paper, the numerical solutions of the Black-Scholes equation for European options (Call and Put) as well as American options with dividends were studied and the effects of dividend payments on option pricing have also been considered.
Book ChapterDOI
Basics of the Finite Difference Method
TL;DR: The finite difference method, which is the main tool of this book, is used to solve various partial differential equations that arise in mathematical finance.
Journal ArticleDOI
Behaviour of Bond's Embedded Option with Regard to Credit Rating
TL;DR: In this article, the authors studied the behavior of an option premium of a call/put option which is embedded in a typical fixed coupon bond with finite maturity, and concluded about the dynamics of premium changes; represented by direction and sensitivity; with respect to the changes in credit rating and also risk-free interest rate development.
Journal ArticleDOI
A high-order deferred correction method for the solution of free boundary problems using penalty iteration, with an application to American option pricing
TL;DR: A high-order deferred correction algorithm combined with penalty iteration for solving free and moving boundary problems, using a fourth-order finite difference method that could be applied to essentially any free boundary problem formulated as an LCP.