Variational inequality method in stock loans
Zongxia Liang, Weiming Wu
TL;DR
This paper introduces new stock loan products and uses a variational inequality approach to explicitly determine their values and parameter ranges, providing a mathematical framework for pricing these financial instruments.
Contribution
The paper develops a novel variational inequality method to explicitly value stock loans and capped stock loans, advancing financial product valuation techniques.
Findings
Explicit valuation formulas for stock loans and capped stock loans
Ranges of fair parameter values for the new financial products
Application of variational inequalities in financial product pricing
Abstract
In this paper we first introduce two new financial products: stock loan and capped stock loan. Then we develop a pure variational inequality method to establish explicitly the values of these stock loans. Finally, we work out ranges of fair values of parameters associated with the loans.
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Taxonomy
TopicsStochastic processes and financial applications · Optimization and Variational Analysis · Nonlinear Partial Differential Equations