In this paper, installment options on the underlying asset which evolves according to Black-Scholes model and pays constant dividend to its owner will be considered. Applying arbitrage pricing theory, the non-homogeneous parabolic partial differential equation governing the value of installment option is derived. Then, penalty method is used to value the European continuous installment call opt...

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.

We obtain some ”universal” estimates for L2-norm of the solution of a parabolic equation via a weighted version of H-norm of the free term. More precisely, we found the limit upper estimate that can be achieved by transformation of the equation by adding a constant to the zero order coefficient. The inverse matrix of the higher order coefficients of the parabolic equation is included into the w...

We suggest a modification of the estimate for weighted L2-norm of the solution gradient of a parabolic equation via L2-norm of the free term. We found the limit upper estimate that can be achieved by transformation of the equation via adding a constant to the zero order coefficient. This upper limit estimate is used to obtain an asymptotic estimate for this weighted norm of the gradient at init...