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Turbo Warrant rebatesand finite differences: Pricing Turbo Warrant rebates based on one underlying stock with discrete dividendsin the Black-Scholes framework
KTH, School of Engineering Sciences (SCI), Mathematics (Dept.), Numerical Analysis, NA.
2014 (English)Independent thesis Advanced level (degree of Master (One Year)), 20 credits / 30 HE creditsStudent thesisAlternative title
Prissättning av Turbowarranters rabattdel skrivna påen underliggande tillgång med diskreta aktieutdelningar i Black-Scholesmodellen (Swedish)
Abstract [en]

Pricing Turbo Warrants with binomial trees can be a challenging or even impossible task. The presence of a barrier makes pricing highly sensitive to computational settings and numerical parameters, rather than the actual pricing mathematics. To remedy this, new numerical methods, of which Crank Nicolson is one such method, are investigated. The survey indicates that the Crank Nicolson method not only solves the aforementioned sensitivities to settings, but also is a worthy competitor to the binomial method in more cases than just the Turbo Warrant.

Abstract [sv]

Prissättning av Turbowarranter med binomialträdkan vara en besvärlig eller omöjlig uppgift. Barriärer i kontrakt fårprissättningen att bli så pass känslig för beräkningsdomänens storlek, form ochandra numeriska parametrar, att dessa tenderar att överskugga den faktiskamatematik som beräknar priset för kontraktet. För att lösa detta problemundersöks ett antal numeriska metoder, av vilka Crank-Nicolsonmetoden är ensådan metod. Resultaten antyder att inte bara att känsligheten för numeriskaparametrar lindras, utan att Crank-Nicolsonmetoden i sin helhet utgör en värdigersättare till binomialträdsmodellen i fler fall än bara Turbowarranter

Place, publisher, year, edition, pages
2014.
Series
TRITA-MAT-E, 2014:07
National Category
Computational Mathematics
Identifiers
URN: urn:nbn:se:kth:diva-140506OAI: oai:DiVA.org:kth-140506DiVA: diva2:690744
Subject / course
Numerical Analysis
Educational program
Master of Science in Engineering -Engineering Physics
Supervisors
Examiners
Available from: 2014-01-24 Created: 2014-01-24 Last updated: 2014-01-24Bibliographically approved

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Numerical Analysis, NA
Computational Mathematics

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CiteExportLink to record
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Citation style
  • apa
  • harvard1
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  • modern-language-association-8th-edition
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Output format
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