pide_kou: Solve a PIDE/variational inequality under Kou's...

In shill1729/OptionPricer: An option pricer for European and American vanilla stock options

Description

Solve a PIDE/variational equality under Kou's jump-diffusion dynamics using an implicit-explicit finite difference scheme. A composite trapezoid rule is used to approximate the jump-integral term.

Usage

pide_kou(
  spot,
  strike,
  maturity,
  parameters,
  what = "call",
  style = "american",
  output = "greeks",
  N = 200,
  M = 200,
  L = 101
)

Arguments

spot	the spot price
strike	the strike sprice
maturity	the maturity of the option contract
parameters	the vector of parameters, see details.
what	the payoff to use
style	'european' for PDE/PIDE problems, 'american' for variational inequalities
output	"greeks", "price" or "grid" for the format to return the solution in
N	the time resolution
M	the space resolution
L	the jump resolution

Details

The vector parameters must contain:

• rate the risk-neutral rate

• div the dividend yield rate

• volat the annual volatility

• lambda the mean rate of jumps per year

• prob the probability of upward jump

• alpha the mean size of upward jumps

• beta the mean size of downward jumps

• ku the displacement from the origin of upward jumps

• kd the displacement from the origin of downward jumps

shill1729/OptionPricer documentation built on June 11, 2020, 12:18 a.m.