American Call Options under Jump-Diffusion Processes

Carl Chiarella, Boda Kang and Gunter H. Meyer

Chapter 3 in The Numerical Solution of the American Option Pricing Problem:Finite Difference and Transform Approaches, 2014, pp 11-47 from World Scientific Publishing Co. Pte. Ltd.

Abstract: In this chapter we shall drop the stochastic volatility component from the dynamics by assuming that the variance is constant and merely discuss how to handle the jump term in the transform approach. Option pricing under jump-diffusion dynamics was originally investigated by Merton (1976) for the case of the European option, but here we also consider American options.

Keywords: American Option; Early Exercise; Method of Lines; Finite Difference Approach; Integral Transform Approach; Numerical Methods (search for similar items in EconPapers)
Date: 2014
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