TY - JOUR
T1 - Finite Volume Method for Pricing European Call Option with Regime-switching Volatility
AU - Tauryawati, Mey Lista
AU - Imron, Chairul
AU - Putri, Endah R.M.
N1 - Publisher Copyright:
© 2018 Published under licence by IOP Publishing Ltd.
PY - 2018/3/22
Y1 - 2018/3/22
N2 - In this paper, we present a finite volume method for pricing European call option using Black-Scholes equation with regime-switching volatility. In the first step, we formulate the Black-Scholes equations with regime-switching volatility. we use a finite volume method based on fitted finite volume with spatial discretization and an implicit time stepping technique for the case. We show that the regime-switching scheme can revert to the non-switching Black Scholes equation, both in theoretical evidence and numerical simulations.
AB - In this paper, we present a finite volume method for pricing European call option using Black-Scholes equation with regime-switching volatility. In the first step, we formulate the Black-Scholes equations with regime-switching volatility. we use a finite volume method based on fitted finite volume with spatial discretization and an implicit time stepping technique for the case. We show that the regime-switching scheme can revert to the non-switching Black Scholes equation, both in theoretical evidence and numerical simulations.
UR - http://www.scopus.com/inward/record.url?scp=85045768557&partnerID=8YFLogxK
U2 - 10.1088/1742-6596/974/1/012024
DO - 10.1088/1742-6596/974/1/012024
M3 - Conference article
AN - SCOPUS:85045768557
SN - 1742-6588
VL - 974
JO - Journal of Physics: Conference Series
JF - Journal of Physics: Conference Series
IS - 1
M1 - 012024
T2 - 3rd International Conference on Mathematics: Pure, Applied and Computation, ICoMPAC 2017
Y2 - 1 November 2017 through 1 November 2017
ER -