Numerical Analysis of American Option Pricing in a Jump-Diffusion Model

Xiao Lan Zhang
Xiao Lan Zhang
Desk R&D, MARC, SGOP, Tour Société Générale, 17 Cours Valmy, 92987 Paris–La Défense Cedex, France
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Desk R&D, MARC, SGOP, Tour Société Générale, 17 Cours Valmy, 92987 Paris–La Défense Cedex, France

Published Online:1 Aug 1997https://doi.org/10.1287/moor.22.3.668

Abstract

We discuss pricing formulae for American options in Merton's jump-diffusion model. With the help of variational inequalities, we derive some regularity properties of price functions. Using the finite difference method, a discretization scheme is presented and a convergence theorem for the first order derivatives is proved. Numerical methods and results are also discussed.

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cover image Mathematics of Operations Research

Volume 22, Issue 3

August 1997

Pages 513-768

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Published Online:August 01, 1997

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Xiao Lan Zhang, (1997) Numerical Analysis of American Option Pricing in a Jump-Diffusion Model. Mathematics of Operations Research 22(3):668-690.

https://doi.org/10.1287/moor.22.3.668

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Numerical Analysis of American Option Pricing in a Jump-Diffusion Model

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Volume 22, Issue 3

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