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(2011 / vol.13 / no.1)
NUMERICAL METHODS OF PARTIAL INTEGRO-DIFFERENTIAL EQUATIONS FOR OPTION PRICE
YONGHOON KWON
Pages. 1-5   



In this survey article, starting with the Black-Scholes equations whose solutions are the values of European options, we describe the exponential jump-diffusion model of Levy process type. This partial integro-differential model is an extension of the Black-Sholes equation combined with integral terms based on a random variable of jump size. Explicit and implicit numerical schemes of finite differences are surveyed and discussed.



1. The Black-Sholes equation
2. The exponential jump-diffusion models
3. Discretization with finite differences
4. Implicit method and discussion



European and American options, The Black-Scholes equation, Partial integro-differential equation, Finite differences, Linear complementarity problem



65M06, 65M12, 91B28