Finite Differences Approach to Option Pricing

Alexey Shvedov

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Alexey Shvedov¹
¹ National Research University Higher School of Economics, 20 Myasnitskaya Str., Moscow, 101000, Russian Federation

Finite Differences Approach to Option Pricing

2002. Vol. 6. No. 2. P. 193–216 [issue contents]

The paper shows how partial differential equations for the prices of financial instruments are derived. By the example of convertible bonds and European stock options, it is demonstrated how the initial and boundary conditions leading to completely different solutions for the same equation are set. The results of calculations, including the use of a new difference scheme for this area, are presented.

Citation: Shvedov A. (2002) Primenenie metoda konechnykh raznostey dlya otsenki finansovykh instrumentov [Finite Differences Approach to Option Pricing]. HSE Economic Journal , vol. 6, no 2, pp. 193-216 (in Russian)

Keywords: the theory of options; financial instrument; bond market; derivative financial instrument

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Alexey Shvedov1 1 National Research University Higher School of Economics, 20 Myasnitskaya Str., Moscow, 101000, Russian Federation

Finite Differences Approach to Option Pricing

Alexey Shvedov¹
¹ National Research University Higher School of Economics, 20 Myasnitskaya Str., Moscow, 101000, Russian Federation