Pricing and Applications of Digital Installment Options

<table class="table-group" width="800px"><tr class="fig-image" id="a"><td><img alt="584705.fig.005a" src="https://static-preview.hindawi.com/articles/jam/volume-2012/584705/figures/584705.fig.005a.jpg"/></td></tr><tr class="fig-caption"><td align="center"><table><tr><td><b>(a) </b><svg height="15.0875" id="M193" style="vertical-align:-2.3205pt" version="1.1" viewbox="0 0 27.387501 15.0875" width="27.387501" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink">
<g transform="matrix(.017,0,0,-.017,.062,12.138)"><path d="M559 163q-23 -66 -68 -163h-474l6 26q62 4 79.5 19.5t28.5 75.5l78 409q7 35 8.5 49t-8 25t-24 13t-51.5 5l5 28h266l-6 -28q-65 -5 -79.5 -18t-25.5 -74l-76 -406q-10 -57 14 -75q12 -13 96 -13q93 0 126 29q41 40 76 109z" id="x1D43F"></path></g><g transform="matrix(.017,0,0,-.017,9.769,12.138)"><path d="M300 -147l-18 -23q-106 71 -159 185.5t-53 254.5v1q0 139 53 252.5t159 186.5l18 -24q-74 -62 -115.5 -173.5t-41.5 -242.5q0 -130 41.5 -242.5t115.5 -174.5z" id="x28"></path></g><g transform="matrix(.017,0,0,-.017,15.65,12.138)"><path d="M324 430l-26 -36l-112 -4l-55 -265q-13 -66 7 -66q13 0 44.5 20t50.5 40l17 -24q-38 -40 -85.5 -73.5t-87.5 -33.5q-50 0 -21 138l55 262h-80l-2 8l25 34h66l25 99l78 63l10 -9l-37 -153h128z" id="x1D461"></path></g><g transform="matrix(.017,0,0,-.017,21.447,12.138)"><path d="M275 270q0 -296 -211 -440l-19 23q75 62 116.5 174t41.5 243t-42 243t-116 173l19 24q211 -144 211 -440z" id="x29"></path></g>
</svg> linear function of <svg height="10.3875" id="M194" style="vertical-align:-0.1638pt" version="1.1" viewbox="0 0 5.9250002 10.3875" width="5.9250002" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink">
<g transform="matrix(.017,0,0,-.017,.062,10.125)"><path d="M324 430l-26 -36l-112 -4l-55 -265q-13 -66 7 -66q13 0 44.5 20t50.5 40l17 -24q-38 -40 -85.5 -73.5t-87.5 -33.5q-50 0 -21 138l55 262h-80l-2 8l25 34h66l25 99l78 63l10 -9l-37 -153h128z" id="x1D461"></path></g>
</svg></td></tr></table></td></tr><tr class="fig-image" id="b"><td><img alt="584705.fig.005b" src="https://static-preview.hindawi.com/articles/jam/volume-2012/584705/figures/584705.fig.005b.jpg"/></td></tr><tr class="fig-caption"><td align="center"><table><tr><td><b>(b) </b><svg height="15.0875" id="M195" style="vertical-align:-2.3205pt" version="1.1" viewbox="0 0 27.387501 15.0875" width="27.387501" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink">
<g transform="matrix(.017,0,0,-.017,.062,12.138)"><path d="M559 163q-23 -66 -68 -163h-474l6 26q62 4 79.5 19.5t28.5 75.5l78 409q7 35 8.5 49t-8 25t-24 13t-51.5 5l5 28h266l-6 -28q-65 -5 -79.5 -18t-25.5 -74l-76 -406q-10 -57 14 -75q12 -13 96 -13q93 0 126 29q41 40 76 109z" id="x1D43F"></path></g><g transform="matrix(.017,0,0,-.017,9.769,12.138)"><path d="M300 -147l-18 -23q-106 71 -159 185.5t-53 254.5v1q0 139 53 252.5t159 186.5l18 -24q-74 -62 -115.5 -173.5t-41.5 -242.5q0 -130 41.5 -242.5t115.5 -174.5z" id="x28"></path></g><g transform="matrix(.017,0,0,-.017,15.65,12.138)"><path d="M324 430l-26 -36l-112 -4l-55 -265q-13 -66 7 -66q13 0 44.5 20t50.5 40l17 -24q-38 -40 -85.5 -73.5t-87.5 -33.5q-50 0 -21 138l55 262h-80l-2 8l25 34h66l25 99l78 63l10 -9l-37 -153h128z" id="x1D461"></path></g><g transform="matrix(.017,0,0,-.017,21.447,12.138)"><path d="M275 270q0 -296 -211 -440l-19 23q75 62 116.5 174t41.5 243t-42 243t-116 173l19 24q211 -144 211 -440z" id="x29"></path></g>
</svg> staircase function of <svg height="10.3875" id="M196" style="vertical-align:-0.1638pt" version="1.1" viewbox="0 0 5.9250002 10.3875" width="5.9250002" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink">
<g transform="matrix(.017,0,0,-.017,.062,10.125)"><path d="M324 430l-26 -36l-112 -4l-55 -265q-13 -66 7 -66q13 0 44.5 20t50.5 40l17 -24q-38 -40 -85.5 -73.5t-87.5 -33.5q-50 0 -21 138l55 262h-80l-2 8l25 34h66l25 99l78 63l10 -9l-37 -153h128z" id="x1D461"></path></g>
</svg></td></tr></table></td></tr></table>

<table>Examples of time-varying payment schemes.</table>

Journal of Applied Mathematics

fig5

Figure 5

Figure 5: Pricing and Applications of Digital Installment Options 