Analytical and numerical solutions for the pricing of a combination of two financial derivatives in a market under Hull-White model

الموضوعات :

Hossein Sahebi Fard ¹ ( Department of Mathematics, Faculty of Mathematical Sciences, Shahrood University of Technology, Shahrood, Semnan, Iran. )
Elham Dastranj ² ( Department of Mathematics, Faculty of Mathematical Sciences, Shahrood University of Technology, Shahrood, Semnan, Iran. )
Abdolmajid Abdolbaghi Ataabadi ³ ( Department of Management, Faculty of Industrial Engineering and Management, Shahrood University of Technology, Shahrood, Semnan, Iran. )

تاريخ الإرسال : 23 الإثنين , شوال, 1441 تاريخ التأكيد : 07 السبت , جمادى الأولى, 1443 تاريخ الإصدار : 05 السبت , ربيع الأول, 1444

الکلمات المفتاحية: Hull-White model, parabolic differential equation, zero-coupon bond option,

ملخص المقالة :

In this paper‎ a combination of two financial derivatives in financial markets modelled of future interest rates is presented and evaluated. In fact ‎European option pricing is driven when zero-coupon bond is considered as underlying asset in a market under Hull-White model‎. ‎For this purpose, the exact solutions of the valuation of this bond option are driven, using Lie group symmetries method. Then in the next part, the finite difference method is applied to find numerical solutions for assumed bond option pricing. Then the significance and usefulness of this approximated method is comparing with the exact solutions by some plotted graphs.

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