Journal of Computational Finance

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Hopscotch methods for two-state financial models

Adam Kurpiel, Thierry Roncalli

ABSTRACT

In this paper, the authors consider hopscotch methods for solving two-state financial models. First a solution is derived for two-dimensional partial differential equations with mixed boundary conditions. Then a number of financial applications are considered, including stochastic volatility option pricing, term structure modeling with two states, and elliptic irreversible investment problems.

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