Title

Semi-analytic valuation of stock loans with finite maturity

RIS ID

100460

Publication Details

Lu, X. & Putri, E. R. M. (2015). Semi-analytic valuation of stock loans with finite maturity. Communications in Nonlinear Science and Numerical Simulation, 27 (1-3), 206-215.

Abstract

In this paper we study stock loans of finite maturity with different dividend distributions semi-analytically using the analytical approximation method in Zhu (2006). Stock loan partial differential equations (PDEs) are established under Black-Scholes framework. Laplace transform method is used to solve the PDEs. Optimal exit price and stock loan value are obtained in Laplace space. Values in the original time space are recovered by numerical Laplace inversion. To demonstrate the efficiency and accuracy of our semi-analytic method several examples are presented, the results are compared with those calculated using existing methods. We also present a calculation of fair service fee charged by the lender for different loan parameters.

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Link to publisher version (DOI)

http://dx.doi.org/10.1016/j.cnsns.2015.03.007