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A Radial Point Interpolation Method for Pricing Options on a Dividend Paying Asset

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International Journal of Computer Applications
Foundation of Computer Science (FCS), NY, USA
Year of Publication: 2017
Authors:
Abdelmgid O. M. Sidahmed
10.5120/ijca2017915180

Abdelmgid O M Sidahmed. A Radial Point Interpolation Method for Pricing Options on a Dividend Paying Asset. International Journal of Computer Applications 172(7):1-6, August 2017. BibTeX

@article{10.5120/ijca2017915180,
	author = {Abdelmgid O. M. Sidahmed},
	title = {A Radial Point Interpolation Method for Pricing Options on a Dividend Paying Asset},
	journal = {International Journal of Computer Applications},
	issue_date = {August 2017},
	volume = {172},
	number = {7},
	month = {Aug},
	year = {2017},
	issn = {0975-8887},
	pages = {1-6},
	numpages = {6},
	url = {http://www.ijcaonline.org/archives/volume172/number7/28260-2017915180},
	doi = {10.5120/ijca2017915180},
	publisher = {Foundation of Computer Science (FCS), NY, USA},
	address = {New York, USA}
}

Abstract

We present the radial point interpolation method (RPIM) to solve problems for pricing American and European put options on a dividend paying asset. Using RPIM, we get a system of ordinary differential equations which is then solved by a time integration methods . To resolve the difficulties associated with solving the free boundary problem associated with American options, we use a penalty approach. Numerical experiments are presented which prove the computational efficiency of the RPIM.

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Keywords

European put options, American put options, dividend paying, radial point interpolation method