construct_tridiagonals

Volatility of diffusion process (without jumps to default)

sigma

The ratio between time interval <code>dt</code>
and the square of space interval <code>dz^2</code>

structure_constant

Vector of drift rate of underlying equity grid points, including
induced drift from default intensity

drift

Matrix entries for implicit numerical differentiation using Neumann boundary conditions

Algorithms to price American and European
equity options, convertible bonds and a
variety of other financial derivatives. It uses an
extension of the usual Black-Scholes model in which
jump to default may occur at a probability specified
by a power-law link between stock price and hazard
rate as found in the paper by Takahashi, Kobayashi,
and Nakagawa (2001) <doi:10.3905/jfi.2001.319302>. We
use ideas and techniques from Andersen and
Buffum (2002) <doi:10.2139/ssrn.355308> and
Linetsky (2006) <doi:10.1111/j.1467-9965.2006.00271.x>.

construct_tridiagonals: Matrix entries for implicit numerical differentiation using Neumann boundary conditions

Description

Usage

Arguments

Value