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Finite Difference Methods and Jump Processes Arising in the Pricing of Contingent Claims: A Synthesis

Published online by Cambridge University Press:  06 April 2009

Michael J. Brennan  and
Eduardo S. Schwartz
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Extract

Since the seminal article by Black and Scholes on the pricing of corporate liabilities, the importance in finance of contingent claims has become widely recognized. The key to the valuation of such claims has been found to lie in the solution to certain partial differential equations. The best known of these was derived by Black and Scholes, in their original article, from the assumption that the value of the asset underlying the contingent claim follows a geometric Brownian motion.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 13 , Issue 3 , September 1978 , pp. 461 - 474
Copyright
Copyright © School of Business Administration, University of Washington 1978

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References

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