A Numerical Approach to Pricing Exchange Options under Stochastic Volatility and Jump-Diffusion Dynamics

• Main Authors: Garces, Len Patrick Dominic M, Cheang, Gerald H. L.
• Format: text
• Published: Archīum Ateneo 2021
• Subjects: Exchange options; Jump-diffusion processes; Method of lines; Put-call transformation; Stochastic volatility; Mathematics
• Online Access: https://archium.ateneo.edu/mathematics-faculty-pubs/157; https://www.tandfonline.com/doi/abs/10.1080/14697688.2021.1926534?journalCode=rquf20
• Institution: Ateneo De Manila University

We consider a method of lines (MOL) approach to determine prices of European and American exchange options when underlying asset prices are modeled with stochastic volatility and jump-diffusion dynamics. As with any other numerical scheme for partial differential equations (PDEs); the MOL becomes in...