Böttcher, Albrecht ; Grudsky, Sergei ; Porter, R. Michael : European double-barrier options with a compound Poisson component
- Author(s):
-
Böttcher, Albrecht
Grudsky, Sergei
Porter, R. Michael
- Title:
- European double-barrier options with a compound Poisson component
- Electronic source:
-
application/pdf
- Preprint series:
- Technische Universität Chemnitz, Fakultät für Mathematik (Germany). Preprint 13, 2009
- Mathematics Subject Classification:
-
60J75 [ Jump processes ] 47N10 [ Applications in optimization, convex analysis, mathematical programming, economics ] - Abstract:
- We consider European double-barrier options for underlyings that are given by the superposition of a Gaussian and a compound Poisson process with discrete values. The determination of the price of such options leads to a Black-Scholes system that is perturbed by a Toeplitz matrix. On the basis of this observation, we design an effective algorithm for the computation of this price. Numerical examples are provided.
- Keywords:
- double barrier option, L´evy process, compound Poisson process, Toeplitz matrix
- Language:
-
English
- Publication time:
- 7 / 2009
