Option Pricing under Risk-Minimization Criterion in an Incomplete Market with the Finite Difference Method

الملخص EN

We study option pricing with risk-minimization criterion in an incomplete market where the dynamics of the risky underlying asset is governed by a jump diffusion equation with stochastic volatility.

We obtain the Radon-Nikodym derivative for the minimal martingale measure and a partial integro-differential equation (PIDE) of European option.

The finite difference method is employed to compute the European option valuation of PIDE.