An Implicit-Explicit Computational Method Based on Time Semi-Discretization for Pricing Financial Derivatives with Jumps ()
ABSTRACT
This paper considers pricing European options under the well-known of SVJ
model of Bates and related computational methods. According to the no-arbitrage
principle, we first derive a partial differential equation that the value of
any European contingent claim should satisfy, where the asset price obeys the SVJ model. This equation
is numerically solved by using the implicit- explicit
backward difference method and time semi-discretization. In order to explain
the validity of our method, the stability of time semi-discretization scheme is also proved. Finally, we use a simulation example to
illustrate the efficiency of the method.
Share and Cite:
Wang, Y. (2018) An Implicit-Explicit Computational Method Based on Time Semi-Discretization for Pricing Financial Derivatives with Jumps.
Open Journal of Statistics,
8, 334-344. doi:
10.4236/ojs.2018.82022.
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