EconPapers    
Economics at your fingertips  
 

Valuation of boundary-linked assets

Jose Vidal-Sanz and Mercedes Esteban-Bravo ()

DEE - Working Papers. Business Economics. WB from Universidad Carlos III de Madrid. Departamento de Economía de la Empresa

Abstract: This article studies the valuation of boundary-linked assets and their derivatives in continuous-time markets. Valuing boundary-linked assets requires the solution of a stochastic differential equation with boundary conditions, which, often, is not Markovian. We propose a wavelet-collocation algorithm for solving a Milstein approximation to the stochastic boundary problem. Its convergence properties are studied. Furthermore, we value boundary-linked derivatives using Malliavin calculus and Monte Carlo methods. We apply these ideas to value European call options of boundary-linked assets

Date: 2004-11
References: View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://e-archivo.uc3m.es/bitstream/handle/10016/104/wb045720.pdf?sequence=1 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cte:wbrepe:wb045720

Access Statistics for this paper

More papers in DEE - Working Papers. Business Economics. WB from Universidad Carlos III de Madrid. Departamento de Economía de la Empresa
Bibliographic data for series maintained by Ana Poveda ().

 
Page updated 2020-10-30
Handle: RePEc:cte:wbrepe:wb045720