4.2 Performance Comparison of shout options with no jumps
The first example is carried out for the jump-diffusion model with the
parameter\(\ \lambda=0\), that is, the underlying asset follows
geometric Brownian motion only. For comparison, we also include results
in [2] and [4] for the same shout options. The result in [4]
were obtained using numerical PDE method and in [2] using a
similarity reduction and an explicit difference method.
Parameters are used \(\sigma=0.20,r=0.10,K=\$100,T=5yr\) In
Table 1.The Reference solution using asset grid nodes=\(n\), time
steps=\(n\). Result in [4]: time steps=\(n\), asset grid
nodes=\(2n-1\).The error given is for the course grid and was
estimated using the converged answer at the finest level as an
approximation for the exact solution.