The Differential Algorithm for American Put Option with Transaction Costs under CEV Model

Yin Zhao () and Tan Chang ()
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Yin Zhao: School of Statistics and Mathematics, Central University of Finance and Economics, Beijing100081, China
Tan Chang: School of Statistics and Mathematics, Central University of Finance and Economics, Beijing100081, China

Journal of Systems Science and Information, 2014, vol. 2, issue 5, 401-410

Abstract: This paper mainly studies the American put option pricing with transaction costs in the CEV process. The specific Crank-Nicolson form of numerical solution is obtained by the finite difference method. On this basis, Hong Kong stock CKH option is selected as the object to estimate option price. Finally, by comparing with the actual price, the American put option pricing model is verified as reasonable. This paper is significant to the rational pricing and the institutional construction of the upcoming stock options in mainland China.

Keywords: CEV model; American option pricing; the finite difference method; put option (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:bpj:jossai:v:2:y:2014:i:5:p:401-410:n:2

DOI: 10.1515/JSSI-2014-0401

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