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How Can I Price an Option with a PDE Method in Matlab?
In this article, we build a very simple PDE solver for the Black-Scholes Equation. Using the Finite Volume Discretization Method, we derive the equations required for an efficient implementation in...
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How Can I Implement Early Exercise in a PDE Method pricing an American Put...
An American option is an option which the owner can exercise at any time during its lifetime. That means the option’s value cannot drop below the exercise value, i.e. the option value of an American...
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How Do Efficient PDE Solvers for Barrier Options Look Like?
Besides European and American Options, another challenge in option pricing is the valuation of Barrier Options. We will see that simply applying the algorithms from the previous posts does not converge...
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How Can I Handle Complex Pricing Models with PDE Solvers?
In the previous posts, we saw that it is easy to create a PDE solver for pricing options. But, what happens if one likes to price more complex structures like convertible bonds or variable annuities?...
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