Application of the Operator-Splitting Algorithm for Pricing Convertible Bond

摘要：

Operator-splitting algorithm is proposed to solve the two-factor pricing model of convertible bond. The original partial differential equation (PDE) describing the model is split into two PDEs with the derivatives by stock price and interest rate respectively, and the solution of the original PDE can be achieved by solving the split PDEs. The advantages of this algorithm are simplicity of programming and consideration of the correlation between two dynamic processes of stock price and interest rate. Result calculated using the suggested algorithm agrees with a former investigation using the method of characteristics/finite elements.

关键词： Convertible bond Numerical algorithm Operator-splitting Finite difference method

作者: Zhufang WANG Shengjun ZHONG

作者单位: School of Administration,Shenyang University of Technology,Shenyang,110023,China School of Material and Metallurgy Engneering,Northeastern University,Shenyang,110006,China

会议类型: 国际会议

会议名称: 工业工程与系统管理2007年国际会议(International Conference on Industrial Engineering and Systems Management)(IESM 2007)

会议地点: 北京

会议语种:英文

在线出版日期: 2007-05-30（万方平台首次上网日期，不代表论文的发表时间）