This paper considers the Fourier transform approach to derive the implicit integral equation for the price of an American call option in the case where the underlying asset follows a jump-diffusion process. Using the method of Jamshidian (1992), we demonstrate that the call option price is given...

This paper presents a numerical method for pricing American call options where the underlying asset price follows a jump-diffusion process. The method is based on the Fourier-Hermite series expansions of Chiarella, El-Hassan amp; Kucera (1999), which we extend to allow for Poisson jumps, in the...

The primary purpose of this paper is to provide an in-depth analysis of a number of structurally different methods to numerically evaluate European compound option prices under Heston’s stochastic volatility dynamics. Therefore, we first outline several approaches that can be used to price...

The early exercise opportunity of an American option makes it challenging to price and an array of approaches have been proposed in the vast literature on this topic. In <i>The Numerical Solution of the American Option Pricing Problem</i>, Carl Chiarella, Boda Kang and Gunter Meyer focus on two...

A compound option (the mother option) gives the holder the right, but not obligation to buy (long) or sell (short) the underlying option (the daughter option). In this paper, we demonstrate a partial differential equation (PDE) approach to pricing American-type compound options where the...

The stochastic or random nature of commodity prices plays a central role in models for valuing financial contingent claims on commodities. In this paper, by enhancing a multifactor framework which is consistent not only with the market observable forward price curve but also the volatilities and...