Pricing of American Put Option under a Jump Diffusion Process with Stochastic Volatility in an Incomplete Market
Joint Authors
Wiwatanapataphee, Benchawan
Li, Shuang
Zhou, Yanli
Ruan, Xinfeng
Source
Issue
Vol. 2014, Issue 2014 (31 Dec. 2014), pp.1-8, 8 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2014-02-26
Country of Publication
Egypt
No. of Pages
8
Main Subjects
Abstract EN
We study the pricing of American options in an incomplete market in which the dynamics of the underlying risky asset is driven by a jump diffusion process with stochastic volatility.
By employing a risk-minimization criterion, we obtain the Radon-Nikodym derivative for the minimal martingale measure and consequently a linear complementarity problem (LCP) for American option price.
An iterative method is then established to solve the LCP problem for American put option price.
Our numerical results show that the model and numerical scheme are robust in capturing the feature of incomplete finance market, particularly the influence of market volatility on the price of American options.
American Psychological Association (APA)
Li, Shuang& Zhou, Yanli& Ruan, Xinfeng& Wiwatanapataphee, Benchawan. 2014. Pricing of American Put Option under a Jump Diffusion Process with Stochastic Volatility in an Incomplete Market. Abstract and Applied Analysis،Vol. 2014, no. 2014, pp.1-8.
https://search.emarefa.net/detail/BIM-1013515
Modern Language Association (MLA)
Li, Shuang…[et al.]. Pricing of American Put Option under a Jump Diffusion Process with Stochastic Volatility in an Incomplete Market. Abstract and Applied Analysis No. 2014 (2014), pp.1-8.
https://search.emarefa.net/detail/BIM-1013515
American Medical Association (AMA)
Li, Shuang& Zhou, Yanli& Ruan, Xinfeng& Wiwatanapataphee, Benchawan. Pricing of American Put Option under a Jump Diffusion Process with Stochastic Volatility in an Incomplete Market. Abstract and Applied Analysis. 2014. Vol. 2014, no. 2014, pp.1-8.
https://search.emarefa.net/detail/BIM-1013515
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-1013515