Semi-analytic valuation of stock loans with finite maturity

Xiaoping Lu*, Endah R.M. Putri

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

15 Citations (Scopus)

Abstract

In this paper we study stock loans of finite maturity with different dividend distributions semi-analytically using the analytical approximation method in Zhu (2006). Stock loan partial differential equations (PDEs) are established under Black-Scholes framework. Laplace transform method is used to solve the PDEs. Optimal exit price and stock loan value are obtained in Laplace space. Values in the original time space are recovered by numerical Laplace inversion. To demonstrate the efficiency and accuracy of our semi-analytic method several examples are presented, the results are compared with those calculated using existing methods. We also present a calculation of fair service fee charged by the lender for different loan parameters.

Original languageEnglish
Pages (from-to)206-215
Number of pages10
JournalCommunications in Nonlinear Science and Numerical Simulation
Volume27
Issue number1-3
DOIs
Publication statusPublished - 1 Oct 2015
Externally publishedYes

Keywords

  • American call
  • Finite maturity stock loan
  • Laplace transform
  • Semi-analytic method

Fingerprint

Dive into the research topics of 'Semi-analytic valuation of stock loans with finite maturity'. Together they form a unique fingerprint.

Cite this