Reduced basis for vanilla and basket options
نویسنده
چکیده
In [3] it was shown that by writing the solution of the Black-Scholes partial differential equation on a small set of basis functions the computing time can be dramatically reduced. In this study we explore the generalization of the technique to basket options.
منابع مشابه
Static-Arbitrage optimal subreplicating strategies for Basket Options
In this paper we investigate the possible values of basket options. Instead of postulating a model and pricing the basket option using that model, we consider the set of all models which are consistent with the observed prices of vanilla options of all strikes. In the case of basket options on two components we find, within this class, the model for which the price of the basket option is small...
متن کاملHedging Basket Options by Using a Subset of Underlying Assets
The purpose of this paper is to investigate the use of Principal Component Analysis in finding the efficient subset of underlying assets for hedging European basket options. This asset selection technique can be used together with other hedging strategies to enhance the hedging performance. Meanwhile, it become practical and essential when some of the underlying assets are illiquid or even not ...
متن کاملStatic-Arbitrage Bounds on the Prices of Basket Options via Linear Programming
We show that the problem of computing sharp upper and lower static-arbitrage bounds on the price of a European basket option, given the prices of other similar options, can be cast as a linear program (LP). The LP formulations readily yield super-replicating (subreplicating) strategies for the upper (lower) bound problem. The dual counterparts of the LP formulations in turn yield underlying ass...
متن کاملRadial basis function partition of unity methods for pricing vanilla basket options
Mesh-free methods based on radial basis function (RBF) approximation are widely used for solving PDE problems. They are flexible with respect to the problem geometry and highly accurate. A disadvantage of these methods is that the linear system to be solved becomes dense for globally supported RBFs. A remedy is to introduce localisation techniques such as partition of unity (PU). RBF-PU methods...
متن کاملComparison of Selected Advanced Numerical Methods for Greeks Calculation of Vanilla Options
Option valuation has been a challenging issue of financial engineering and optimization for a long time. The increasing complexity of market conditions requires utilization of advanced models that, commonly, do not lead to closed-form solutions. Development of novel numerical procedures, which prove to be efficient within various option valuation problems, is therefore worthwhile. Notwithstan...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
برای دانلود متن کامل این مقاله و بیش از 32 میلیون مقاله دیگر ابتدا ثبت نام کنید
ثبت ناماگر عضو سایت هستید لطفا وارد حساب کاربری خود شوید
ورودعنوان ژورنال:
- Risk and Decision Analysis
دوره 2 شماره
صفحات -
تاریخ انتشار 2011