valuation of installment option by penalty method

Authors

ali beiranvand

university of tabriz karim ivaz

university of tabriz

abstract

in this paper, installment options on the underlying assetwhich evolves according to black-scholes model and pays constant dividendto its owner will be considered. applying arbitrage pricing theory,the non-homogeneous parabolic partial differential equation governingthe value of installment option is derived. then, penalty method is usedto value the european continuous installment call option.

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Journal title:
computational methods for differential equations

جلد ۳، شماره ۴، صفحات ۲۹۸-۳۱۰

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