An Implicit Double Discretization Method for Pricing Options under Metron’s Jumpdiffusion Model

Abstract:

An implicit double discretization method is developed for pricing European and American options under Merton's jumpdiffusion model. Stability of the method is discussed. Numerical experiments show that the proposed method is effective and robust, and has advantages over the explicit scheme.

Key words:implicit double discretization; Merton's jumpdiffusion options model; stability