Numerical simulations for the pricing of options in jump diffusion markets

Youssef El-Khatib; Qasem M. Al-Mdallal

doi:10.1016/j.ajmsc.2011.10.001

Numerical simulations for the pricing of options in jump diffusion markets

Youssef El-Khatib, Qasem M. Al-Mdallal

Department of Mathematical Sciences

Research output: Contribution to journal › Article › peer-review

9 Citations (Scopus)

Abstract

In this paper we find numerical solutions for the pricing problem in jump diffusion markets. We consider a model where the underlying asset price is driven by the process sum of a Brownian motion and an independent compensated Poisson process. By risk neutral pricing the option price can be expressed as an expectation. We simulate the option's price numerically using Monte Carlo method.

Original language	English
Pages (from-to)	199-208
Number of pages	10
Journal	Arab Journal of Mathematical Sciences
Volume	18
Issue number	2
DOIs	https://doi.org/10.1016/j.ajmsc.2011.10.001
Publication status	Published - Jul 2012

Keywords

European options
Incomplete markets
Model with jumps
Monte Carlo method

ASJC Scopus subject areas

General Mathematics

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10.1016/j.ajmsc.2011.10.001

Cite this

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abstract = "In this paper we find numerical solutions for the pricing problem in jump diffusion markets. We consider a model where the underlying asset price is driven by the process sum of a Brownian motion and an independent compensated Poisson process. By risk neutral pricing the option price can be expressed as an expectation. We simulate the option's price numerically using Monte Carlo method.",

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AB - In this paper we find numerical solutions for the pricing problem in jump diffusion markets. We consider a model where the underlying asset price is driven by the process sum of a Brownian motion and an independent compensated Poisson process. By risk neutral pricing the option price can be expressed as an expectation. We simulate the option's price numerically using Monte Carlo method.

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KW - Model with jumps

KW - Monte Carlo method

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ER -

Numerical simulations for the pricing of options in jump diffusion markets

Abstract

Keywords

ASJC Scopus subject areas

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