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Numerical solutions to an integro-differential parabolic problem arising in the pricing of financial options in a Levy market

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  • Ionuţ Florescu
  • Maria Cristina Mariani
  • Granville Sewell

Abstract

We study the numerical solutions for an integro-differential parabolic problem modeling a process with jumps and stochastic volatility in financial mathematics. We present two general algorithms to calculate numerical solutions. The algorithms are implemented in PDE2D, a general-purpose, partial differential equation solver.

Suggested Citation

  • Ionuţ Florescu & Maria Cristina Mariani & Granville Sewell, 2011. "Numerical solutions to an integro-differential parabolic problem arising in the pricing of financial options in a Levy market," Quantitative Finance, Taylor & Francis Journals, vol. 14(8), pages 1445-1452, August.
    • Handle: RePEc:taf:quantf:v:14:y:2011:i:8:p:1445-1452
    DOI: 10.1080/14697688.2011.618144
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    Cited by:

    1. Jose Cruz & Daniel Sevcovic, 2020. "On solutions of a partial integro-differential equation in Bessel potential spaces with applications in option pricing models," Papers 2003.03851, arXiv.org.
    2. Galayda, S. & Barany, E., 2012. "Stochastic differential equation derivation: Comparison of the Markov method versus the additive method," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(20), pages 4564-4574.
    3. Chen, Goong & Mariani, Maria Christina & SenGupta, Indranil & Mai, Nicholas, 2012. "Spectral analysis and generation of certain highly oscillatory curves related to chaos," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(4), pages 1453-1468.

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