option pricing under risk-minimization criterion in an incomplete market with the finite difference method
;Xinfeng Ruan;Wenli Zhu;Shuang Li;Jiexiang Huang
journal of power sources2013Vol. 2013pp. -
117
ruan2013mathematicaloption
Abstract
We study option pricing with risk-minimization criterion in an incomplete market where the dynamics of the risky underlying asset is governed by a jump diffusion equation with stochastic volatility. We obtain the Radon-Nikodym derivative for the minimal martingale measure and a partial integro-differential equation (PIDE) of European option. The finite difference method is employed to compute the European option valuation of PIDE.