An ETD method for multi-asset American option pricing under jump-diffusion model

Company Rossi, Rafael; Egorova, Vera; Jódar Sánchez, Lucas

doi:10.1002/mma.9125

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AnETDMethodMultiAsset.pdf (15.14Mb)

Identificadores

URI: https://hdl.handle.net/10902/28969

DOI: 10.1002/mma.9125

ISSN: 0170-4214

ISSN: 1099-1476

Fecha

2023-01

Derechos

Attribution-NonCommercial 4.0 International

Publicado en

Mathematical Methods in the Applied Sciences, 2023, 46(9), 10332-10347

Editorial

John Wiley & Sons

Enlace a la publicación

https://doi.org/10.1002/mma.9125

Palabras clave

Exponential time differencing

Jump-diffusion model

Multi-asset option pricing

Multivariate Gauss-Hermite quadrature

Partial-integro differential equation

Resumen/Abstract

In this paper, we propose a numerical method for American multi-asset options under jump-diffusion model based on the combination of the exponential time differencing (ETD) technique for the differential operator and Gauss-Hermite quadrature for the integral term. In order to simplify the computational stencil and improve characteristics of the ETD-scheme mixed derivative eliminating transformation is applied. The results are compared with recently proposed methods.

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