Wavelet-Galerkin Method for Option Pricing under a Double Exponential Jump-Diffusion Model

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dc.contributor.authorČerná, Dana
dc.date.accessioned2019-11-13T07:33:38Z
dc.date.available2019-11-13T07:33:38Z
dc.date.issued2018
dc.description.abstractThe paper is concerned with pricing European options using a double exponential jump-diffusion model proposed by Kou in 2002. The Kou model is represented by nonstationary partial integro-differential equation. We use the Crank-Nicolson scheme for semidiscretization in time and the Galerkin method with cubic spline wavelets for solving integro-differential equation at each time level. We show the decay of elements of the matrices arising from discretization of the integral term of the equation. Due to this decay the discretization matrices can be truncated and represented by quasi-sparse matrices while the most standard methods suffer from the fact that the discretization matrices are full. Since the basis functions are piecewise cubic we obtain a high order convergence and the problem can be resolved with the small number of degrees of freedom. We present a numerical example for a European put option and we compare the results with other methods.cs
dc.format.extent6 strancs
dc.identifier.doi10.1109/MCSI.2018.00037
dc.identifier.orcid0000-0003-3259-8919 Černá, Dana
dc.identifier.urihttps://dspace.tul.cz/handle/15240/154235
dc.identifier.urihttps://ieeexplore.ieee.org/document/8769787
dc.language.isocscs
dc.publisherIEEE, 345 E 47TH ST, NEW YORK, NY 10017 USA
dc.relation.ispartof2018 5TH INTERNATIONAL CONFERENCE ON MATHEMATICS AND COMPUTERS IN SCIENCES AND INDUSTRY (MCSI 2018)
dc.subjectKou modelcs
dc.subjectjump-diffusion modelcs
dc.subjectwavelet-Galerkin methodcs
dc.subjectoption pricingcs
dc.subjectcubic spline waveletscs
dc.titleWavelet-Galerkin Method for Option Pricing under a Double Exponential Jump-Diffusion Modelcs
dc.typeProceedings Paper
local.citation.epage127
local.citation.spage122
local.event.edate2018-08-27
local.event.locationCorfu, GREECE
local.event.sdate2018-08-24
local.event.title5th International Conference on Mathematics and Computers in Sciences and Industry (MCSI)
local.identifier.publikace7362
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