pide_merton_grid: Solve a PIDE/variational inequality under Merton's...

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

Description

Solve a PIDE/variational equality under Merton'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_merton_grid(
  spot,
  strike,
  maturity,
  parameters,
  N = 100L,
  M = 100L,
  L = 51L,
  what = "call",
  style = "american"
)

Arguments

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

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

• jm the mean size of jumps

• jv the volatility of the size of jumps

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