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Efficient Numerical Valuation of Continuous Installment Options

Published online by Cambridge University Press:  03 June 2015

Anton Mezentsev ,
Anton Pomelnikov  and
Matthias Ehrhardt
Anton Mezentsev*
Affiliation:
IDE, Halmstad University, Box 823, 301 18, Halmstad, Sweden
Anton Pomelnikov*
Affiliation:
IDE, Halmstad University, Box 823, 301 18, Halmstad, Sweden
Matthias Ehrhardt*
Affiliation:
Lehrstuhl für Angewandte Mathematik und Numerische Analysis, Fachbereich C–Mathematik und Naturwissenschaften, Bergische Universität Wuppertal, Gaußstr. 20, 42119 Wuppertal, Germany
*
Corresponding author. URL: http://www-num.math.uni-wuppertal.de/~ehrhardt/ Email: a.g.mezentsev@gmail.com
Email: pomelnikov.anton@gmail.com
Email: ehrhardt@math.uni-wuppertal.de
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Abstract

In this work we investigate the novel Kryzhnyi method for the numerical inverse Laplace transformation and apply it to the pricing problem of continuous installment options. We compare the results with the one obtained using other classical methods for the inverse Laplace transformation, like the Euler summation method or the Gaver-Stehfest method.

Keywords

65M1078A48Installment optionsBlack-Scholes equationnumerical inverse Laplace transformGaver-Stehfest methodEuler summation methodoptimal stopping problemnon-monotonic stopping boundary
Type
Research Article
Information
Advances in Applied Mathematics and Mechanics , Volume 3 , Issue 2 , April 2011 , pp. 141 - 164
Copyright
Copyright © Global-Science Press 2011

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