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Computations for the Delta Hedging of European Options by Mixed Finite Element Methods

Title
Computations for the Delta Hedging of European Options by Mixed Finite Element Methods
Authors
박슬기
Date Issued
2011
Publisher
포항공과대학교
Abstract
Mixed finite element method is applied with Crank-Nicolson method to numerical computations of Black-Scholes partial differential equation of European call options. The Lowest degree of Raviart-Thomas-Nedelec finite element space is used on one dimensional variable. By computing numerical approximations, we report superconvergence of pointwise error on Gaussian points for the derivative of the solution which is called the delta hedging as well as the solution called the option price. Also by comparing the market price and the delta hedging of the KOSPI 200 index option with the option value and the delta value, respectively, estimated by the proposed method, the accuracy of the numerical approximation of real market data is shown.
URI
http://postech.dcollection.net/jsp/common/DcLoOrgPer.jsp?sItemId=000000900905
http://oasis.postech.ac.kr/handle/2014.oak/1124
Article Type
Thesis
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