Efficient and Accurate Finite Difference Method for the Four Underlying Asset ELS

한국수학교육학회지시리즈B:순수및응용수학 / Journal of the Korean Society of Mathematical Education Series B: The Pure and Applied Mathematics, (P)1226-0657; (E)2287-6081

2021, v.28 no.4, pp.329-341

https://doi.org/https://doi.org/10.7468/jksmeb.2021.28.4.329

Hwang, Hyeongseok (Department of Financial Engineering, Korea University)
Choi, Yongho (Department of Mathematics and Big Data, Daegu University)
Kwak, Soobin (Department of Mathematics, Korea University)
Hwang, Youngjin (Department of Mathematics, Korea University)
Kim, Sangkwon (Department of Mathematics, Korea University)
Kim, Junseok (Department of Mathematics, Korea University)

Hwang, Hyeongseok, Choi, Yongho, Kwak, Soobin, Hwang, Youngjin, Kim, Sangkwon, & Kim, Junseok. (2021). EFFICIENT AND ACCURATE FINITE DIFFERENCE METHOD FOR THE FOUR UNDERLYING ASSET ELS. 한국수학교육학회지시리즈B:순수및응용수학, 28(4), 329-341, https://doi.org/https://doi.org/10.7468/jksmeb.2021.28.4.329

복사

Abstract

In this study, we consider an efficient and accurate finite difference method for the four underlying asset equity-linked securities (ELS). The numerical method is based on the operator splitting method with non-uniform grids for the underlying assets. Even though the numerical scheme is implicit, we solve the system of discrete equations in explicit manner using the Thomas algorithm for the tri-diagonal matrix resulting from the system of discrete equations. Therefore, we can use a relatively large time step and the computation of the ELS option pricing is fast. We perform characteristic computational test. The numerical test confirm the usefulness of the proposed method for pricing the four underlying asset equity-linked securities.

keywords: four underlying asset ELS, equity-linked securities, Black-Scholes equation, finite difference scheme

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논문 상세

Vol.28 No.4

EFFICIENT AND ACCURATE FINITE DIFFERENCE METHOD FOR THE FOUR UNDERLYING ASSET ELS

Efficient and Accurate Finite Difference Method for the Four Underlying Asset ELS

Abstract

한국수학교육학회지시리즈B:순수및응용수학