option pricing under risk-minimization criterion in an incomplete market with the finite difference method

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 sources 2013 Vol. 2013 pp. -
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.

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231079
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10.1155/2013/165727
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