This chapter shifts from tree-based and simulation-based techniques toward partial differential equation (PDE) methods for option pricing. Since the Black–Scholes equation is itself a PDE, finite difference methods provide a direct way to approximate solutions by discretizing both time and the underlying asset’s price space.

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Finite Difference Methods

  • Aaron De la Rosa

摘要

This chapter shifts from tree-based and simulation-based techniques toward partial differential equation (PDE) methods for option pricing. Since the Black–Scholes equation is itself a PDE, finite difference methods provide a direct way to approximate solutions by discretizing both time and the underlying asset’s price space.