Document Type : Research Paper
Department of Applied Mathematics, Ferdowsi University of Mashhad, Mashhad, Iran
Department of applied mathematics Ferdowsi university of Mashhad Mashhad and The Center of Excellence on Modeling and Control Systems, Ferdowsi University of Mashhad, Iran
Department of Statistics, Ferdowsi University of Mashhad, Mashhad, Iran
We extend the method presented by Xu and Zheng (Int. J. Theor. Appl. Finance 17 (2014) 21--36) for the general case. We develop a numerical-analytic formula for pricing nonlinear basket options with jump-diffusion model. We derive an easily computed method by using the asymptotic expansion to find the approximate value of the lower bound of nonlinear European basket call prices since a nonlinear basket option is generally not closed-form. We use Split Step Backward Euler and Compensated Split Step Backward Euler methods with Monte Carlo simulation to check the validity of the presented method.