Pricing of American put option under a jump diffusion process with stochastic volatility in an incomplete market
type: Item
instance of: scholarly article
title: Pricing of American put option under a jump diffusion process with stochastic volatility in an incomplete market
zbMATH Open document ID: 1406.91449
DOI: 10.1155/2014/236091
author: Shuang Li
author: Xinfeng Ruan
author: Yanli Zhou
author: Benchawan Wiwatanapataphee
published in: Abstract and Applied Analysis
publication date: 2019-02-14T00:00:00Z
review text: Summary: We study the pricing of American options in an incomplete market in which the dynamics of the underlying risky asset is driven by a jump diffusion process with stochastic volatility. By employing a risk-minimization criterion, we obtain the Radon-Nikodym derivative for the minimal martingale measure and consequently a linear complementarity problem (LCP) for American option price. An iterative method is then established to solve the LCP problem for American put option price. Our numerical results show that the model and numerical scheme are robust in capturing the feature of incomplete finance market, particularly the influence of market volatility on the price of American options.
Mathematics Subject Classification ID: 91G20
Mathematics Subject Classification ID: 60G40
Mathematics Subject Classification ID: 60G44
Mathematics Subject Classification ID: 60J75
zbMATH DE Number: 7021968
zbMATH Keywords: American put option pricing
zbMATH Keywords: jump diffusion process
zbMATH Keywords: minimal martingale measure
Wikidata QID: Q59036497
MaRDI profile type: Publication
full work available at URL: https://doi.org/10.1155/2014/236091
OpenAlex ID: W2092719108
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description: scientific article; zbMATH DE number 7021968