Pricing European call options with interval-valued volatility and interest rate
dc.contributor.author | Wang, Song | |
dc.date.accessioned | 2024-10-03T07:10:07Z | |
dc.date.available | 2024-10-03T07:10:07Z | |
dc.date.issued | 2024 | |
dc.identifier.citation | Wang, S. 2024. Pricing European call options with interval-valued volatility and interest rate. Applied Mathematics and Computation. 474. | |
dc.identifier.uri | http://hdl.handle.net/20.500.11937/96006 | |
dc.identifier.doi | 10.1016/j.amc.2024.128698 | |
dc.description.abstract |
We propose a novel approach to pricing European call options when both of the volatility of the underlying asset and interest are uncertain. In this approach, we formulate the option pricing problem with uncertain parameters as a partial-differential inequality constrained interval optimization problem. An interior penalty method is then developed for the numerical solution of the finite-dimensional optimization problem arising from the discretization of the continuous pricing problem by a finite difference scheme. A convergence theory for the penalty method is established. An algorithm based on Newton's iterative method is also proposed for solving the penalty equation. Numerical results are presented to demonstrate the effectiveness and usefulness of this approach and the numerical methods. | |
dc.relation.sponsoredby | http://purl.org/au-research/grants/arc/DP190103361 | |
dc.rights.uri | https://creativecommons.org/licenses/by/4.0/ | |
dc.title | Pricing European call options with interval-valued volatility and interest rate | |
dc.type | Journal Article | |
dcterms.source.volume | 474 | |
dcterms.source.issn | 0096-3003 | |
dcterms.source.title | Applied Mathematics and Computation | |
dc.date.updated | 2024-10-03T07:10:07Z | |
curtin.department | School of Elec Eng, Comp and Math Sci (EECMS) | |
curtin.accessStatus | Open access | |
curtin.faculty | Faculty of Science and Engineering | |
curtin.contributor.orcid | Wang, Song [0000-0002-5198-8173] | |
curtin.contributor.researcherid | Wang, Song [B-9809-2008] | |
curtin.contributor.scopusauthorid | Wang, Song [7410335978] | |
curtin.repositoryagreement | V3 |