Showing 1 - 10 of 27
Jump-diffusion and Levy models have been widely used to partially alleviate some of the biases inherent in the classical Black-Scholes-Merton model. Unfortunately, the resulting pricing problem requires solving a more difficult partial-integro differential equation (PIDE) and although several...
Persistent link: https://www.econbiz.de/10012721135
Diverse finite-difference schemes for solving pricing problems with Levy underliers have been used in the literature. Invariably, the integral and diffusive terms are treated asymmetrically, large jumps are truncated, the methods are difficult to extend to higher dimensions and cannot easily...
Persistent link: https://www.econbiz.de/10012756490
Energy commodities, such as oil, gas and electricity, lack the liquidity of equity markets, have large costs associated with storage, exhibit high volatilities and can have significant spikes in prices. Furthermore, and possibly most importantly, commodities tend to revert to long run...
Persistent link: https://www.econbiz.de/10012747113
Multi-factor interest-rate models are widely used. Contingent claims with early exercise features are often valued by resorting to trees, finite-difference schemes and Monte Carlo simulations. When jumps are present, however, these methods are less effective. In this work we develop an algorithm...
Persistent link: https://www.econbiz.de/10010883214
Persistent link: https://www.econbiz.de/10008278340
In this study, we present numerical methods, based on the optimal quadratic spline collocation (OQSC) methods, for solving the shallow water equations (SWEs) in spherical coordinates. The error associated with quadratic spline interpolation is fourth order locally at certain points and third...
Persistent link: https://www.econbiz.de/10010749744
Currently in most global meteorological applications, low-order finite difference or finite element methods, or the spectral transform method are used. The spectral transform method, which yields high-order approximations, requires Legendre transforms. The Legendre transforms have a...
Persistent link: https://www.econbiz.de/10010750017
In this paper, we extend the Cramer-Lundberg insurance risk model perturbed by diffusion to incorporate stochastic volatility and study the resulting Gerber-Shiu expected discounted penalty (EDP) function. Under the assumption that volatility is driven by an underlying Ornstein-Uhlenbeck (OU)...
Persistent link: https://www.econbiz.de/10012758093
It is well known that purely structural models of default cannot explain short-term credit spreads, while purely intensity-based models lead to completely unpredictable default events. Here we introduce a hybrid model of default, in which a firm enters a quot;distressed'' state once its...
Persistent link: https://www.econbiz.de/10012749873
Persistent link: https://www.econbiz.de/10005374955