Schwartz [3] proposed a model to solve for the value of a warrant or an option when a closed-form solution of the valuation equation cannot be obtained. This model is based on a difference approximation of the valuation equation and uses standard numerical methods. We intend to show here that the same methods can be used to derive a difference approximation of the solution of the valuation equation which has a greater level of accuracy than Schwartz's approximation.
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Georges Courtadon (1982) studied this question.
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