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Meshfree methods in option pricing
Halmstad University, School of Information Technology.
Halmstad University, School of Information Technology, Halmstad Embedded and Intelligent Systems Research (EIS).
AMNA, Bergische Universität Wuppertal, Wuppertal, Germany.ORCID iD: 0000-0003-2561-8854
2012 (English)Conference paper, Published paper (Refereed)
Abstract [en]

A meshfree approximation scheme based on the radial basis function (RBF) methods is presented for the numerical solution of the options pricing model. This work deals with the valuation of the European, Asian and American options. The option prices are modeled by the Black-Scholes equation. The θ-method is used to discretize the equation with respect to time. Next, the option price is approximated in space with RBF. In case of American options a penalty method is used, i.e. the free boundary is removed by adding a small and continuous penalty term to the Black-Scholes equation. Finally, we present a comparison of analytical and finite difference solutions and numerical results. © 2012 MANT.

Place, publisher, year, edition, pages
2012. p. 243-246
Keywords [en]
American options, Approximation scheme, Black Scholes equations, Finite-difference solution, Free boundary, Mesh-free method, Meshfree, Numerical results, Numerical solution, Option price Option pricing, Options pricing, Penalty methods, Penalty term, Radial basis functions, Image segmentation, Partial differential equations, Radial basis function networks
National Category
Other Mathematics
Identifiers
URN: urn:nbn:se:hh:diva-40226Scopus ID: 2-s2.0-84867015472ISBN: 978-1-4673-2366-6 (print)ISBN: 978-9940-9436-0-8 (electronic)OAI: oai:DiVA.org:hh-40226DiVA, id: diva2:1337237
Conference
Conference of 1st Mediterranean Conference on Embedded Computing (MECO), Bar, Montenegro, June 19-21, 2012
Available from: 2019-07-12 Created: 2019-07-12 Last updated: 2019-08-13Bibliographically approved

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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf