| Numerical computation of fractional Black-Scholes equation with time-dependent parameters for American options under the CEV model |
| کد مقاله : 1012-FEMATH5-FULL |
| نویسندگان |
|
مریم رضائی میرارکلائی *1، احمد رضا یزدانیان2 1مطهری محله- ک 22 بهمن-بن بست دوم-کد پستی 4764943994 2دانشگاه سمنان |
| چکیده مقاله |
| In this paper, we investigate time- fractional Black- Scholes equation under the constant elasticity of variance (CEV) model for American option pricing which risk- free interest rate and dividend yield assumed as deterministic functions of time and local volatility is a function of underlying asset price. By using finite difference scheme, we obtain numerical approximation of American option. We use two finite difference scheme for the Black- Scholes equation to determine the American option price under CEV model with time- dependent parameters. We get approximation solution of the Black- Scholes equation with time- fractional order derivative and time-integer order derivative by using implicit finite difference method and Crank- Nicolson finite difference method, respectively. Also, we check behavior of American option price relative to the parameters of elasticity factor, fractional order derivative and risk- free interest rate, that option price is increasing or decreasing relative to parameters. The example shows efficiency of the method. |
| کلیدواژه ها |
| CEV model, Time-dependent parameters, Option pricing, American option, Fractional Black-Scholes equation. |
| وضعیت: پذیرفته شده برای ارائه شفاهی |