TY - JOUR ID - 5005 TI - Valuation of installment option by penalty method JO - Computational Methods for Differential Equations JA - CMDE LA - en SN - 2345-3982 AU - Beiranvand, Ali AU - Ivaz, Karim AD - Faculty of Mathematical Sciences, University of Tabriz, Tabriz, Iran Y1 - 2015 PY - 2015 VL - 3 IS - 4 SP - 298 EP - 310 KW - Installment option KW - Black-Scholes model KW - penalty method KW - Free boundary problem DO - N2 - In this paper, installment options on the underlying asset which evolves according to Black-Scholes model and pays constant dividend to its owner will be considered. Applying arbitrage pricing theory, the non-homogeneous parabolic partial differential equation governing the value of installment option is derived. Then, penalty method is used to value the European continuous installment call option. UR - https://cmde.tabrizu.ac.ir/article_5005.html L1 - https://cmde.tabrizu.ac.ir/article_5005_63ae507b538b5501876dab8b92feb175.pdf ER -