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dc.contributor.authorLi, W.
dc.contributor.authorWang, Song
dc.contributor.editorAdil Bagirov
dc.contributor.editorKaisa Miettinen
dc.contributor.editorGerhard-Wilhelm Weber
dc.date.accessioned2017-01-30T11:19:51Z
dc.date.available2017-01-30T11:19:51Z
dc.date.created2015-04-23T03:53:29Z
dc.date.issued2014
dc.identifier.citationLi, W. and Wang, S. 2014. A numerical method for pricing European options with proportional transaction costs, in Adil Bagirov, Kaisa Miettinen, Gerhard-Wilhelm Weber (ed), 25th European Conference on Operational Research (EURO XXV 2012), Jul 8 2012, pp. 59-78. Vilnius, Lithuania: Kluwer Academic Publishers.
dc.identifier.urihttp://hdl.handle.net/20.500.11937/10608
dc.identifier.doi10.1007/s10898-014-0155-5
dc.description.abstract

In the paper,we propose a numerical technique based on a finite difference scheme in space and an implicit time-stepping scheme for solving the Hamilton–Jacobi–Bellman (HJB) equation arising from the penalty formulation of the valuation ofEuropean options with proportional transaction costs. We show that the approximate solution from the numerical scheme converges to the viscosity solution of the HJB equation as the mesh sizes in space and time approach zero. We also propose an iterative scheme for solving the nonlinear algebraic system arising from the discretization and establish a convergence theory for the iterative scheme. Numerical experiments are presented to demonstrate the robustness and accuracy of the method.

dc.publisherKluwer Academic Publishers
dc.subjectOptimal feedback control
dc.subjectComplementarity problems
dc.subjectConvergence
dc.subjectGlobal optimizer
dc.subjectEuropean option pricing
dc.subjectFinite difference method
dc.subjectHJB equations
dc.titleA numerical method for pricing European options with proportional transaction costs
dc.typeConference Paper
dcterms.source.volume60
dcterms.source.startPage59
dcterms.source.endPage78
dcterms.source.issn0925-5001
dcterms.source.titleJournal of Global Optimization, Volume 60, Issue 1, September 2014: Special issue dedicated to the 25th European conference on operational research (EURO XXV 2012)
dcterms.source.seriesJournal of Global Optimization, Volume 60, Issue 1, September 2014: Special issue dedicated to the 25th European conference on operational research (EURO XXV 2012)
dcterms.source.conference25th European Conference on Operational Research (EURO XXV 2012)
dcterms.source.conference-start-dateJul 8 2012
dcterms.source.conferencelocationVilnius, Lithuania
dcterms.source.placeUnited States
curtin.accessStatusFulltext not available


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