Homotopy analysis method for boundary-value problem of turbo warrant pricing under stochastic volatility

Hoi Ying WONG, Mei Choi CHIU

Research output: Contribution to journalArticles

2 Citations (Scopus)

Abstract

Turbo warrants are liquidly traded financial derivative securities in over-the-counter and exchange markets in Asia and Europe. The structure of turbo warrants is similar to barrier options, but a lookback rebate will be paid if the barrier is crossed by the underlying asset price. Therefore, the turbo warrant price satisfies a partial differential equation (PDE) with a boundary condition that depends on another boundary-value problem (BVP) of PDE. Due to the highly complicated structure of turbo warrants, their valuation presents a challenging problem in the field of financial mathematics. This paper applies the homotopy analysis method to construct an analytic pricing formula for turbo warrants under stochastic volatility in a PDE framework. Copyright © 2013 Hoi Ying Wong and Mei Choi Chiu.
Original languageEnglish
Article number682524
JournalAbstract and Applied Analysis
Volume2013
DOIs
Publication statusPublished - 2013

Citation

Wong, H. Y., & Chiu, M. C. (2013). Homotopy analysis method for boundary-value problem of turbo warrant pricing under stochastic volatility. Abstract and Applied Analysis, 2013, art no. 682524.

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