This paper deals with the construction of numerical solution of the Black-Scholes (B-S) type equation modeling option pricing with variable yield discrete dividend payment at time . Firstly the shifted delta generalized function appearing in the B-S equation is approximated by an appropriate sequence of nice ordinary functions. Then a semidiscretization technique applied on the underlying asset is used to construct a numerical solution. The limit of this numerical solution is independent of the considered sequence of the nice type. Illustrative examples including the comparison with the exact solution recently given in [2] for the case of constant yield discrete dividend payment are presented.
@article{bwmeta1.element.bwnjournal-article-doi-10_4064-bc83-0-3,
author = {Rafael Company and Lucas J\'odar and Enrique Ponsoda},
title = {Numerical solution of Black-Scholes option pricing with variable yield discrete dividend payment},
journal = {Banach Center Publications},
volume = {83},
year = {2008},
pages = {37-47},
zbl = {1153.91476},
language = {en},
url = {http://dml.mathdoc.fr/item/bwmeta1.element.bwnjournal-article-doi-10_4064-bc83-0-3}
}
Rafael Company; Lucas Jódar; Enrique Ponsoda. Numerical solution of Black-Scholes option pricing with variable yield discrete dividend payment. Banach Center Publications, Tome 83 (2008) pp. 37-47. http://gdmltest.u-ga.fr/item/bwmeta1.element.bwnjournal-article-doi-10_4064-bc83-0-3/