Option pricing under risk-minimization criterion in an incomplete market with the finite difference method (Q460210)
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scientific article; zbMATH DE number 6354458
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| English | Option pricing under risk-minimization criterion in an incomplete market with the finite difference method |
scientific article; zbMATH DE number 6354458 |
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Option pricing under risk-minimization criterion in an incomplete market with the finite difference method (English)
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13 October 2014
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Summary: We study option pricing with risk-minimization criterion in an incomplete market where the dynamics of the risky underlying asset is governed by a jump diffusion equation with stochastic volatility. We obtain the Radon-Nikodym derivative for the minimal martingale measure and a partial integro-differential equation (PIDE) of European option. The finite difference method is employed to compute the European option valuation of PIDE.
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