金融计量学课件NumericalMethods.pdf

Financial Econometrics ZHU Jie Shanghai University of Finance and Economics April 2013 JZ (SUFE) Financial Econometrics 04/2013 1 / 28 Other Numerical Methods Binomial trees. 1. Calibrate parameters. 2. Work backward through the tree. Trinomial tress. It can be used as an alternative to binomial trees. Finite di§erence methods. The Least-squares method. The Boundary parameterization approach. Dynamic programming. JZ (SUFE) Financial Econometrics 04/2013 2 / 28 Finite Di§erence Methods Finite di§erence methods value a derivative by solving the di§erential equation that the derivative satisÖes. The di§erential equation is converted into a set of di§erence equations, and the di§erence equations are solved iteratively. Example: value an American put option. The partial di§erential equation is as follows ∂ f ∂ f 1 ∂2 f 2 2 ∂ t + rS ∂S + 2 σ S ∂S2 = rf . (1) Suppose the life of the option is T. We divide this into N equally spaced intervals of length ∆t = T/N. A total of N + 1 time points are therefore considered: 0, ∆t, 2∆t, , T. JZ (SUFE) Financial Econometrics 04/2013 3 / 28 Finite Di§erence Methods Suppose that Smax is a stock price su¢ ciently high that, when it is reached, the put has virtually no value. We deÖne ∆S = Smax /M and consider a total of M + 1 equally spaced stock prices: 0, ∆S , 2∆S ,