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Valuing Derivative Securities Using the Explicit Finite Difference Method

Citations

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Cited by:

  1. Kristensen, Dennis & Mele, Antonio, 2011. "Adding and subtracting Black-Scholes: A new approach to approximating derivative prices in continuous-time models," Journal of Financial Economics, Elsevier, vol. 102(2), pages 390-415.
  2. Iftekhar Hasan & Sudipto Sarkar, 2002. "Banks' option to lend, interest rate sensitivity, and credit availability," Review of Derivatives Research, Springer, vol. 5(3), pages 213-250, October.
  3. Ben-Ameur, Hatem & de Frutos, Javier & Fakhfakh, Tarek & Diaby, Vacaba, 2013. "Upper and lower bounds for convex value functions of derivative contracts," Economic Modelling, Elsevier, vol. 34(C), pages 69-75.
  4. Jou, Jyh-Bang, 2018. "R&D investment and patent renewal decisions," The Quarterly Review of Economics and Finance, Elsevier, vol. 69(C), pages 144-154.
  5. Dong Zou & Pu Gong, 2017. "A Lattice Framework with Smooth Convergence for Pricing Real Estate Derivatives with Stochastic Interest Rate," The Journal of Real Estate Finance and Economics, Springer, vol. 55(2), pages 242-263, August.
  6. Gong, Pu & Zou, Dong & Wang, Jiayue, 2018. "Pricing and simulation for real estate index options: Radial basis point interpolation," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 500(C), pages 177-188.
  7. Slaa, Chad Te & Elliott, Lisa & Elliott, Matthew, 2017. "Performance of the Producer Accumulator in Corn and Soybean Commodity Markets," 2017 Conference, April 24-25, 2017, St. Louis, Missouri 285880, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  8. Bardia Kamrad & Ricardo Ernst, 2001. "An Economic Model for Evaluating Mining and Manufacturing Ventures with Output Yield Uncertainty," Operations Research, INFORMS, vol. 49(5), pages 690-699, October.
  9. Babbs, Simon, 2000. "Binomial valuation of lookback options," Journal of Economic Dynamics and Control, Elsevier, vol. 24(11-12), pages 1499-1525, October.
  10. Nowman, K. Ben & Sorwar, Ghulam, 2005. "Derivative prices from interest rate models: results for Canada, Hong Kong, and United States," International Review of Financial Analysis, Elsevier, vol. 14(4), pages 428-438.
  11. Anlong Li, 1992. "Binomial approximation in financial models: computational simplicity and convergence," Working Papers (Old Series) 9201, Federal Reserve Bank of Cleveland.
  12. Song-Ping Zhu & Xin-Jiang He, 2018. "A hybrid computational approach for option pricing," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 5(03), pages 1-16, September.
  13. Lian, Yu-Min & Liao, Szu-Lang & Chen, Jun-Home, 2015. "State-dependent jump risks for American gold futures option pricing," The North American Journal of Economics and Finance, Elsevier, vol. 33(C), pages 115-133.
  14. Don M. Chance, 1994. "The Pricing And Hedging Of Limited Exercise Caps And Spreads," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 17(4), pages 561-584, December.
  15. repec:hum:wpaper:sfb649dp2005-007 is not listed on IDEAS
  16. Chi H. Truong, 2014. "A Two Factor Model for Water Prices and Its Implications for Evaluating Real Options and Other Water Price Derivatives," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 62(1), pages 23-45, March.
  17. Grant, Dwight & Vora, Gautam, 2003. "Analytical implementation of the Ho and Lee model for the short interest rate," Global Finance Journal, Elsevier, vol. 14(1), pages 19-47, May.
  18. Jinsha Zhao, 2018. "American Option Valuation Methods," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(5), pages 1-13, May.
  19. Klaassen, Pieter, 1997. "Discretized reality and spurious profits in stochastic programming models for asset/liability management," European Journal of Operational Research, Elsevier, vol. 101(2), pages 374-392, September.
  20. Marín-Sánchez, Freddy H. & Barrera, Alejandro Pinilla & Zambrano, Cristhian Montoya & Hurtado, Santiago Medina, 2025. "Valuation of European call options for the Scott’s stochastic volatility model: An explicit finite difference scheme," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 236(C), pages 411-425.
  21. Tomohisa Yamakami & Yuki Takeuchi, 2022. "Pricing Bermudan Swaption under Two Factor Hull-White Model with Fast Gauss Transform," Papers 2212.08250, arXiv.org.
  22. Dangl, Thomas & Wirl, Franz, 2004. "Investment under uncertainty: calculating the value function when the Bellman equation cannot be solved analytically," Journal of Economic Dynamics and Control, Elsevier, vol. 28(7), pages 1437-1460, April.
  23. Jimmy E. Hilliard & Adam L. Schwartz & Alan L. Tucker, 1996. "Bivariate Binomial Options Pricing With Generalized Interest Rate Processes," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 19(4), pages 585-602, December.
  24. Ekvall, Niklas, 1996. "A lattice approach for pricing of multivariate contingent claims," European Journal of Operational Research, Elsevier, vol. 91(2), pages 214-228, June.
  25. Otto Konstandatos & Timothy J Kyng, 2012. "Real Options Analysis for Commodity Based Mining Enterprises with Compound and Barrier Features," Published Paper Series 2012-3, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
  26. Chuang-Chang Chang & Jun-Biao Lin & Wei-Che Tsai & Yaw-Huei Wang, 2012. "Using Richardson extrapolation techniques to price American options with alternative stochastic processes," Review of Quantitative Finance and Accounting, Springer, vol. 39(3), pages 383-406, October.
  27. Simona Sanfelici, 2004. "Galerkin infinite element approximation for pricing barrier options and options with discontinuous payoff," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 27(2), pages 125-151, December.
  28. Klaassen, Pieter, 1997. "Solving stochastic programming models for asset/liability management using iterative disaggregation," Serie Research Memoranda 0010, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  29. Ball, Daniel R. & Deshmukh, Abhijit & Kapadia, Nikunj, 2015. "An options-based approach to coordinating distributed decision systems," European Journal of Operational Research, Elsevier, vol. 240(3), pages 706-717.
  30. Christopher F. Baum & Olin Liu, 1994. "An Alternative Strategy for Estimation of a Nonlinear Model of the Term Structure of Interest Rates," Boston College Working Papers in Economics 275, Boston College Department of Economics.
  31. Philipp N. Baecker, 2007. "Real Options and Intellectual Property," Lecture Notes in Economics and Mathematical Systems, Springer, number 978-3-540-48264-2, March.
  32. Cristiane Benetti & José Monteiro Varanda Neto & Rogério Mori, 2025. "Macroeconomic Determinants of the Interest Rate Term Structure: A Svensson Model Analysis," Economies, MDPI, vol. 13(4), pages 1-21, April.
  33. Liu, Qiang & Guo, Shuxin, 2020. "An excellent approximation for the m out of n day provision," The North American Journal of Economics and Finance, Elsevier, vol. 54(C).
  34. Carlos Andrés Zapata Quimbayo, 2020. "OPCIONES REALES Una guía teórico-práctica para la valoración de inversiones bajo incertidumbre mediante modelos en tiempo discreto y simulación de Monte Carlo," Books, Universidad Externado de Colombia, Facultad de Finanzas, Gobierno y Relaciones Internacionales, number 138.
  35. M. Wahab & Chi-Guhn Lee, 2011. "Pricing swing options with regime switching," Annals of Operations Research, Springer, vol. 185(1), pages 139-160, May.
  36. Rojas-Bernal, Alejandro & Villamizar-Villegas, Mauricio, 2021. "Pricing the exotic: Path-dependent American options with stochastic barriers," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 2(1).
  37. Otto Konstandatos & Timothy Kyng, 2012. "Real Options Analysis for Commodity Based Mining Enterprises with Compound and Barrier Features," Accounting and Finance Research, Sciedu Press, vol. 1(2), pages 216-216, November.
  38. Timothy Riddiough & Paul Childs & Steven Ott, 2001. "Noise, Real Estate Markets, and Options on Real Assets: Applications," Wisconsin-Madison CULER working papers 01-06, University of Wisconsin Center for Urban Land Economic Research.
  39. Gerald Buetow, Jr. & Joseph Albert, 1998. "The Pricing of Embedded Options in Real Estate Lease Contracts," Journal of Real Estate Research, American Real Estate Society, vol. 15(3), pages 253-266.
  40. Andreas Lohne & Birgit Rudloff, 2011. "An algorithm for calculating the set of superhedging portfolios in markets with transaction costs," Papers 1107.5720, arXiv.org, revised Dec 2013.
  41. Nicolas P. B. Bollen, 1999. "Real Options and Product Life Cycles," Management Science, INFORMS, vol. 45(5), pages 670-684, May.
  42. repec:hum:wpaper:sfb649dp2008-053 is not listed on IDEAS
  43. Paul D. Childs & Alexander J. Triantis, 1999. "Dynamic R&D Investment Policies," Management Science, INFORMS, vol. 45(10), pages 1359-1377, October.
  44. Lim, Terence & Lo, Andrew W. & Merton, Robert C. & Scholes, Myron S., 2006. "The Derivatives Sourcebook," Foundations and Trends(R) in Finance, now publishers, vol. 1(5–6), pages 365-572, April.
  45. Alziary, Benedicte & Decamps, Jean-Paul & Koehl, Pierre-Francois, 1997. "A P.D.E. approach to Asian options: analytical and numerical evidence," Journal of Banking & Finance, Elsevier, vol. 21(5), pages 613-640, May.
  46. Kyungwon Kim & Jae Wook Song, 2020. "Detecting Possible Reduction of the Housing Bubble in Korea for Different Residential Types and Regions," Sustainability, MDPI, vol. 12(3), pages 1-31, February.
  47. Zhongkai Liu & Tao Pang, 2016. "An efficient grid lattice algorithm for pricing American-style options," International Journal of Financial Markets and Derivatives, Inderscience Enterprises Ltd, vol. 5(1), pages 36-55.
  48. Ben-Ameur, Hatem & Breton, Michele & Karoui, Lotfi & L'Ecuyer, Pierre, 2007. "A dynamic programming approach for pricing options embedded in bonds," Journal of Economic Dynamics and Control, Elsevier, vol. 31(7), pages 2212-2233, July.
  49. Yu-Min Lian & Jun-Home Chen & Szu-Lang Liao, 2025. "Valuation of Euro-Convertible Bonds in a Markov-Modulated, Cox–Ingersoll–Ross Economy," Mathematics, MDPI, vol. 13(13), pages 1-13, June.
  50. Yuji Yamada & James Primbs, 2004. "Properties of Multinomial Lattices with Cumulants for Option Pricing and Hedging," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 11(3), pages 335-365, September.
  51. Hull, John & White, Alan, 1995. "The impact of default risk on the prices of options and other derivative securities," Journal of Banking & Finance, Elsevier, vol. 19(2), pages 299-322, May.
  52. Gong, Pu & Dai, Jun, 2017. "Pricing real estate index options under stochastic interest rates," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 479(C), pages 309-323.
  53. S. Dyrting, 2004. "Pricing equity options everywhere," Quantitative Finance, Taylor & Francis Journals, vol. 4(6), pages 663-676.
  54. Hatem Ben-Ameur & Michèle Breton, 2004. "A Dynamic Programming Approach for Pricing Options Embedded in Bonds," Computing in Economics and Finance 2004 237, Society for Computational Economics.
  55. Bing-Huei Lin & Ren-Raw Chen & Jian-Hsin Chou, 1999. "Pricing and quality option in Japanese government bond futures," Applied Financial Economics, Taylor & Francis Journals, vol. 9(1), pages 51-65.
  56. Yuji Yamada, 2012. "Properties of Optimal Smooth Functions in Additive Models for Hedging Multivariate Derivatives," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 19(2), pages 149-179, May.
  57. Philippe Raimbourg & Paul Zimmermann, 2022. "Is normal backwardation normal? Valuing financial futures with a local index-rate covariance," Post-Print hal-04011013, HAL.
  58. Hautsch, Nikolaus & Ou, Yangguoyi, 2012. "Analyzing interest rate risk: Stochastic volatility in the term structure of government bond yields," Journal of Banking & Finance, Elsevier, vol. 36(11), pages 2988-3007.
  59. Yongwoong Lee & Kisung Yang, 2020. "Finite Difference Method for the Hull–White Partial Differential Equations," Mathematics, MDPI, vol. 8(10), pages 1-11, October.
  60. Ren-Raw Chen & Tyler Yang, 1999. "A universal lattice," Review of Derivatives Research, Springer, vol. 3(2), pages 115-133, May.
  61. Carpenter, Jennifer N. & Stanton, Richard & Wallace, Nancy, 2010. "Optimal exercise of executive stock options and implications for firm cost," Journal of Financial Economics, Elsevier, vol. 98(2), pages 315-337, November.
  62. Yuh‐Dauh Lyuu & Yu‐Quan Zhang, 2023. "Pricing multiasset time‐varying double‐barrier options with time‐dependent parameters," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 43(3), pages 404-434, March.
  63. Chow, Ying-Foon & Huang, Charles & Liu, Ming, 2000. "Valuation of adjustable rate mortgages with automatic stretching maturity," Journal of Banking & Finance, Elsevier, vol. 24(11), pages 1809-1829, November.
  64. Raimbourg, Philippe & Zimmermann, Paul, 2022. "Is normal backwardation normal? Valuing financial futures with a local index-rate covariance," European Journal of Operational Research, Elsevier, vol. 298(1), pages 351-367.
  65. In oon Kim & Bong-Gyu Jang & Kyeong Tae Kim, 2013. "A simple iterative method for the valuation of American options," Quantitative Finance, Taylor & Francis Journals, vol. 13(6), pages 885-895, May.
  66. Theodore M. Barnhill & Panagiotis Papapanagiotou & Liliana Schumacher, 2002. "Measuring Integrated Market and Credit Risk in Bank Portfolios: An Application to a Set of Hypothetical Banks Operating in South Africa," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 11(5), pages 401-443, December.
  67. Huang, Jia-Ping & Sumita, Ushio, 2015. "Development of computational algorithms for pricing European bond options under the influence of macro-economic conditions," Applied Mathematics and Computation, Elsevier, vol. 251(C), pages 453-468.
  68. Chung-Li Tseng & Daniel Wei-Chung Miao & San-Lin Chung & Pai-Ta Shih, 2021. "How Much Do Negative Probabilities Matter in Option Pricing?: A Case of a Lattice-Based Approach for Stochastic Volatility Models," JRFM, MDPI, vol. 14(6), pages 1-32, May.
  69. K. Ben Nowman & Ghulam Sorwar, 2003. "Implied option prices from the continuous time CKLS interest rate model: an application to the UK," Applied Financial Economics, Taylor & Francis Journals, vol. 13(3), pages 191-197.
  70. Izvorski, Ivailo, 1998. "A nonuniform grid method for solving PDE's," Journal of Economic Dynamics and Control, Elsevier, vol. 22(8-9), pages 1445-1452, August.
  71. Suresh M. Sundaresan, 2000. "Continuous‐Time Methods in Finance: A Review and an Assessment," Journal of Finance, American Finance Association, vol. 55(4), pages 1569-1622, August.
  72. Liu, Yu-Hong & Jiang, I-Ming & Hung, Mao-Wei, 2025. "Pricing vulnerable options when debts have performance- sensitivity provisions," International Review of Economics & Finance, Elsevier, vol. 103(C).
  73. Figlewski, Stephen & Gao, Bin, 1999. "The adaptive mesh model: a new approach to efficient option pricing," Journal of Financial Economics, Elsevier, vol. 53(3), pages 313-351, September.
  74. Hyun Seok Kim & B. Wade Brorsen, 2012. "Can real option values explain apparent storage at a loss?," Applied Economics, Taylor & Francis Journals, vol. 44(16), pages 2081-2090, June.
  75. Pieter Klaassen, 1998. "Financial Asset-Pricing Theory and Stochastic Programming Models for Asset/Liability Management: A Synthesis," Management Science, INFORMS, vol. 44(1), pages 31-48, January.
  76. Miyazaki, Kenji & Saito, Makoto, 1999. "On the market risk involved in the public financial system in Japan: A theoretical and numerical investigation," Journal of Banking & Finance, Elsevier, vol. 23(8), pages 1243-1259, August.
  77. Amilcar A. Menichini, 2017. "On the value and determinants of the interest tax shields," Review of Quantitative Finance and Accounting, Springer, vol. 48(3), pages 725-748, April.
  78. Lubomira Gertler, 2015. "Interactions of Unconventional Monetary Policy Measures with the Euro Area Yield Curve," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 65(2), pages 106-126, March.
  79. Li, Hongshan & Huang, Zhongyi, 2020. "An iterative splitting method for pricing European options under the Heston model☆," Applied Mathematics and Computation, Elsevier, vol. 387(C).
  80. Riadh Belhaj, 2006. "The Valuation of Options on Bonds with Default Risk," Multinational Finance Journal, Multinational Finance Journal, vol. 10(3-4), pages 277-306, September.
  81. Minqiang Li, 2010. "A quasi-analytical interpolation method for pricing American options under general multi-dimensional diffusion processes," Review of Derivatives Research, Springer, vol. 13(2), pages 177-217, July.
  82. Jyh-Bang Jou & Charlene Tan Lee, 2019. "Optimal statute of limitations under land development timing decisions," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 62(1), pages 1-20, February.
  83. Harding, John P., 2000. "Mortgage Valuation with Optimal Intertemporal Refinancing Strategies," Journal of Housing Economics, Elsevier, vol. 9(4), pages 233-266, December.
  84. Klaassen, Pieter, 1997. "Discretized reality and spurious profits in stochastic programming models for asset/liability management," Serie Research Memoranda 0011, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  85. Iftekhar Hasan & Sudipto Sarkar, 2002. "Banks' option to lend, interest rate sensitivity, and credit availability," Review of Derivatives Research, Springer, vol. 5(3), pages 213-250, October.
  86. Mark Broadie & Jérôme Detemple, 1996. "Recent Advances in Numerical Methods for Pricing Derivative Securities," CIRANO Working Papers 96s-17, CIRANO.
  87. Klein, Peter & Inglis, Michael, 2001. "Pricing vulnerable European options when the option's payoff can increase the risk of financial distress," Journal of Banking & Finance, Elsevier, vol. 25(5), pages 993-1012, May.
  88. Vanden, Joel M., 2005. "Equilibrium analysis of volatility clustering," Journal of Empirical Finance, Elsevier, vol. 12(3), pages 374-417, June.
  89. Phelim Boyle & Yisong Tian, 1998. "An explicit finite difference approach to the pricing of barrier options," Applied Mathematical Finance, Taylor & Francis Journals, vol. 5(1), pages 17-43.
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