dc.contributor.author | Umeorah, Nneka | |
dc.contributor.author | Mashele, Phillip | |
dc.date.accessioned | 2019-05-17T08:08:06Z | |
dc.date.available | 2019-05-17T08:08:06Z | |
dc.date.issued | 2019 | |
dc.identifier.citation | Umeorah, N. & Mashele, P. 2019. A Crank-Nicolson finite difference approach on the numerical estimation of rebate barrier option prices. Cogent economics and finance, 7(1): Article no 1598835. [https://doi.org/10.1080/23322039.2019.1598835] | en_US |
dc.identifier.issn | 2332-2039 (Online) | |
dc.identifier.uri | http://hdl.handle.net/10394/32379 | |
dc.identifier.uri | https://www.tandfonline.com/doi/full/10.1080/23322039.2019.1598835 | |
dc.identifier.uri | https://doi.org/10.1080/23322039.2019.1598835 | |
dc.description.abstract | In modelling financial derivatives, the pricing of barrier options are
complicated as a result of their path-dependency and discontinuous payoffs. In the
case of rebate knock-out barrier options, discount factors known as rebates are
introduced, which are payable to the option holder when the barrier level is breached. The analytical closed-form solution for the vanilla options are known but the
barrier options, owing to their discontinuous nature, can be obtained analytically
using the extended Black-Scholes formula. This research work captures the solution
of the corresponding option pricing partial differential equation on a discrete spacetime grid. We employ the Crank-Nicolson finite difference scheme to estimate the
prices of rebate barrier options, as well as to discuss the effect of rebate on barrier
option values. This work will further investigate the spurious oscillations which arise
from the sensitivity analysis of the Greeks of the barrier options using the CrankNicolson scheme. The theoretical convergence of the Crank-Nicolson discretisation
scheme will be analysed. Furthermore, our research will compare the results from | en_US |
dc.language.iso | en | en_US |
dc.publisher | Taylor & Francis | en_US |
dc.subject | Black-Scholes model | en_US |
dc.subject | Barrier options | en_US |
dc.subject | Rebate barrier options | en_US |
dc.subject | Spurious oscillations | en_US |
dc.subject | Crank-Nicolson method | en_US |
dc.subject | Finite difference method | en_US |
dc.title | A Crank-Nicolson finite difference approach on the numerical estimation of rebate barrier option prices | en_US |
dc.type | Article | en_US |
dc.contributor.researchID | 21234175 - Mashele, Hopolang Phillip | |
dc.contributor.researchID | 27658457 - Umeorah, Nneka Ozioma | |