Hi all,did someone try the analytical solution to the simplified model in Zhou (1997) whenthere is default of the firm only at maturity? It produces a value of about 0.90 (nominal of the bond is 1) for a bondwhere the underlying firm value is zero. Is this right?TT

<t>Maybe I should add some more information. I just analyzed the Black-Cox Model (1976) which does not allow for jumps in the firm valuebut for default before maturity. BC assume a lower barrier at which the holder of the bondreceive the firm value when there is a default before or at maturity. I al...

<t>Hello all,is there someone who tested the analytical solution to the simplified model in Zhou (1997).I tried this to compare it with my numerical solutions (Crank-Nicolson). But there seems to be a mismatch of the definition of default. Zhou defines the writedown as a linear function of thefirm v...

This article you posted is great! It describes exactly the diffulties I am facing now. I will read it carefully and report about my results after trying it out, as soon as possible.Thanx again very much!TT

<t>The CN method I am using averaging in timethe option values are calculated backward in time. But I dont know what is meant by centered in space and fitting in space.You helped me a lot already. I will first read your articles. Give me some time to think about the problem. I will also test IM with...

<t>QuoteOriginally posted by: AlanQuoteOriginally posted by: TimeTravelerI am just working with the Merton (1976) Model with discontinuouties and a PIDE, in the 1-Factor-Model. Is there another way other than Implicit Euler? TTThere is a very simple alternative solution for this class of problem (GB...

<t>Yesterday night I implemented the Full Implicit Method to value a barrier option. The jump and overvaluation at the barrier is still there. By increasing the time steps to 1000 and 2000 (50 state steps) I got slightly better values. Increasing them to 3000 I have to wait around 20-30min to receiv...

<t>I found some papers about the problem valuating barrier options using FDM:Boyle/Tian: Explicit difference approach to the pricing of Barrier optionsApplied Mathematical Finance 5, 17–43 (1998)Zwan: Oscillating behaviour of barrier options of the CN-Method priding barrier optionshttp://citeseerx.i...

Something like Numerical Methods in Finance, MATLAB, Daniel Duffy. I dont remember the name exactly, I only could have a quick look. I will ask him again next time.TT

<t>Cuchulainn,up to now my thesis is still in progress. But I guess it is nothing special to you, because I am just working with the Merton (1976) Model with discontinuouties and a PIDE, in the 1-Factor-Model. I really appreciate you paying interest to my topic. Maybe I can post some parts of it aft...

<t>Cuchulainn,thanx very much for the quick response. I already checked some articles about the problems with Barrier options. But a lot of people use Monte Carlo Simulation and no FD methods (I now say to myself: "guess why"). But because my thesis is about FD i maybe should use it. Maybe I can do ...

<t>Hello Guys,the last days I was trying to implement a european style Barrier option in my finite difference method a la Crank-Nicholson in Matlab. The Vanilla option is working very well. But when I compare my results of a Barrier option with the analytical formula in Hull, the FD approximation al...

just stop smoking!

<t>Hi guys,when implementing the Heston model, or Shobel-Zhu model, a problem is that the complex logarithm has a branch cut. This leads to irregular jumps, as these screenshots from my Matlab implementation show:(1,2,3... on the "pi-axis" are numbers, not multiples of pi, pi=3.14...)Now I spent som...

the Volume 1 is back in the library now. Thanx for askingBut after hours of hard work, without volume 1, I finally managed to get the right solutions. thanx for your supportM