About: Finite difference methods for option pricing

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Finite difference methods for option pricing are numerical methods used in mathematical finance for the valuation of options. Finite difference methods were first applied to option pricing by Eduardo Schwartz in 1977. The approach can be used to solve derivative pricing problems that have, in general, the same level of complexity as those problems solved by tree approaches.

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rdf:type	software
rdfs:label	Finite difference methods for option pricing (en)
rdfs:comment	Finite difference methods for option pricing are numerical methods used in mathematical finance for the valuation of options. Finite difference methods were first applied to option pricing by Eduardo Schwartz in 1977. The approach can be used to solve derivative pricing problems that have, in general, the same level of complexity as those problems solved by tree approaches. (en)
sameAs	Finite difference methods for option pricing Finite difference methods for option pricing
dbp:wikiPageUsesTemplate	dbt:Reflist dbt:Rp dbt:Derivatives_market
Subject	Mathematical finance Numerical differential equations Options (finance)
gold:hypernym	Methods
prov:wasDerivedFrom	http://en.wikipedia.org/wiki/Finite_difference_methods_for_option_pricing?oldid=997389316&ns=0
Wikipage page ID	23715450 (xsd:integer)
page length (characters) of wiki page	7857 (xsd:nonNegativeInteger)
Wikipage revision ID	997389316 (xsd:integer)
Link from a Wikipage to another Wikipage	Mälardalen University College Numerical analysis Underlying Aarhus University Binomial options pricing model Black–Scholes equation Monte Carlo methods for option pricing University of the Western Cape Stencil (numerical analysis) Boundary value problem Mathematical finance Numerical differential equations Options (finance) Differential equation Dimension Dividend policy Put–call parity Hong Kong University of Science and Technology Spot contract Trinomial tree Cornell University Crank–Nicolson method Eduardo Schwartz Option (finance) Option time value Partial differential equation Special case Finite difference Finite difference method Function (mathematics) Institute of Applied Economic Research Interpolation Moneyness Valuation of options Louisiana State University Lattice model (finance) MATLAB Mathematical finance Recurrence relation Recursion Simon Fraser University
has abstract	Finite difference methods for option pricing are numerical methods used in mathematical finance for the valuation of options. Finite difference methods were first applied to option pricing by Eduardo Schwartz in 1977. In general, finite difference methods are used to price options by approximating the (continuous-time) differential equation that describes how an option price evolves over time by a set of (discrete-time) difference equations. The discrete difference equations may then be solved iteratively to calculate a price for the option. The approach arises since the evolution of the option value can be modelled via a partial differential equation (PDE), as a function of (at least) time and price of underlying; see for example the Black–Scholes PDE. Once in this form, a finite difference model can be derived, and the valuation obtained. The approach can be used to solve derivative pricing problems that have, in general, the same level of complexity as those problems solved by tree approaches. (en)
foaf:isPrimaryTopicOf	http://en.wikipedia.org/wiki/Finite_difference_methods_for_option_pricing
is Link from a Wikipage to another Wikipage of	Barrier option Binomial options pricing model Black–Scholes model List of numerical analysis topics Contingent convertible bond Eduardo Schwartz Employee stock option Financial economics Finite difference method Fugit Mathematical finance
is foaf:primaryTopic of	http://en.wikipedia.org/wiki/Finite_difference_methods_for_option_pricing

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