A Finite Element Method for Two Factor Convertible Bonds

Javier Frutos

Chapter Chapter 5 in Numerical Methods in Finance, 2005, pp 109-128 from Springer

Abstract: Abstract We present a finite element method for the numerical valuation of two factor convertible bonds with call and put embedded options. We use the method of lines to decouple the State variables and the temporal discretizations. The State variables discretization is carried out by means of bilinear finite elements. For the temporal discretization we use an implicit-explicit Runge — Kutta method. Some numerical experiments are presented.

Keywords: Finite Element Method; Finite Element Approximation; Temporal Discretization; Convertible Bond; Callable Bond (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-0-387-25118-9_5

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DOI: 10.1007/0-387-25118-9_5

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