Author(s)

Yang Wang

School of Economic, Jinan University, Guangzhou, China.

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.

SVJ Model of Bates, Time Semi-Discretization, Stability, No-Arbitrage Principle, Implicit-Explicit Backward Difference Method

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.