NUMERICAL METHODS AND PARTIAL DIFFERENTIAL EQUATIONS FOR EUROPEAN AND AMERICAN DERIVATIVES WITH COMPLETE AND INCOMPLETE INFORMATION

Mondher Bellalah
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Mondher Bellalah: Université de Cergy-Pontoise, France

Chapter 20 in Derivatives, Risk Management & Value, 2009, pp 833-873 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractThe following sections are included:Chapter OutlineIntroductionValuation of American Calls on Dividend-Paying StocksThe Schwartz modelThe numerical solutionAmerican Puts on Dividend-Paying StocksThe Brennan and Schwartz modelThe numerical solutionNumerical Procedures in the Presence of Information Costs: ApplicationsFinite difference methods in the presence of information costsAn application to the American put using explicit or implicit finite difference methodsConvertible BondsSpecific features of CBThe valuation equationsThe numerical solutionSimulationsTwo-Factor Interest Rate Models and Bond Pricing within Information UncertaintyCBs Pricing within Information UncertaintyThe pricing of CBsSpecific call and put featuresThe pricing of CBs in two-factor models within information uncertaintySummaryAppendix A: A Discretizing Strategy for Mean-Reverting ModelsA simple two-point upstream technique in the presence of an implicit schemeAppendix B: An Algorithm for the American Call with DividendsAppendix C: The Algorithm for the American Put with DividendsAppendix D: The Algorithm for CBs with Call and Put PricesQuestionsExercisesSolutionReferences

Keywords: Options; Forwards; Futures; Valuation; Hedging; Arbitrage; Speculation; Pricing (search for similar items in EconPapers)
Date: 2009
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