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Laplace Transform Method for Pricing American CEV Strangles Option with Two Free Boundaries
Joint Authors
Source
Discrete Dynamics in Nature and Society
Issue
Vol. 2018, Issue 2018 (31 Dec. 2018), pp.1-12, 12 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2018-09-04
Country of Publication
Egypt
No. of Pages
12
Main Subjects
Abstract EN
Laplace transform method (LTM) has a lot of applications in the evaluation of European-style options and exotic options without early exercise features.
However the Laplace transform methods for pricing American options have unsatisfactory accuracy and suffer from the instability.
The aim of this paper is to develop a Laplace transform method for pricing American Strangles options with the underlying asset price following the constant elasticity volatility (CEV) models.
By approximating the free boundaries, the Laplace transform is taken on a fixed space region to replace the moving boundaries space.
After solving the linear system in Laplace space, Gaver-Stehfest formula (GSF) and hyperbola contour integral method (HCIM) are applied to compute the Laplace inversion.
Numerical results show that the LTM-HCIM outperform the LTM-GSF in regard to the accuracy and stability for the option values.
American Psychological Association (APA)
Zhou, Zhiqiang& Wu, Hongying. 2018. Laplace Transform Method for Pricing American CEV Strangles Option with Two Free Boundaries. Discrete Dynamics in Nature and Society،Vol. 2018, no. 2018, pp.1-12.
https://search.emarefa.net/detail/BIM-1152721
Modern Language Association (MLA)
Zhou, Zhiqiang& Wu, Hongying. Laplace Transform Method for Pricing American CEV Strangles Option with Two Free Boundaries. Discrete Dynamics in Nature and Society No. 2018 (2018), pp.1-12.
https://search.emarefa.net/detail/BIM-1152721
American Medical Association (AMA)
Zhou, Zhiqiang& Wu, Hongying. Laplace Transform Method for Pricing American CEV Strangles Option with Two Free Boundaries. Discrete Dynamics in Nature and Society. 2018. Vol. 2018, no. 2018, pp.1-12.
https://search.emarefa.net/detail/BIM-1152721
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-1152721