A stable local radial basis function method for option pricing problem under the Bates model

Ver/Abrir
Identificadores
URI: http://hdl.handle.net/10902/18094
ISSN: 0749-159X
ISSN: 1098-2426
Compartir
Estadísticas
Ver Estadísticas
Google Scholar
Registro completo
Mostrar el registro completo DC
Autoría
Company Rossi, Rafael; Egorova, VeraAutoridad Unican; Jódar Sánchez, Lucas; Soleymani, Fazlollah
Fecha
2019-05
Derechos
© John Wiley & Sons. This is the peer reviewed version of the following article: Company, R, Egorova, VN, Jódar, L, Soleymani, F. A stable local radial basis function method for option pricing problem under the Bates model. Numer Methods Partial Differential Eq. 2018; 35(3), 1035-1055, doi.org/10.1002/num.22337, which has been published in final form at https://doi.org/10.1002/num.22337. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
Publicado en
Numerical Methods for Partial Differential Equations, 2019, 35(3), 1035-1055
Editorial
John Wiley & Sons
Enlace a la publicación
Palabras clave
Bates–Scott model
Option pricing
Radial basis functions
Stochastic volatility
Wendland function
Resumen/Abstract
We propose a local mesh-free method for the Bates-Scott option pricing model, a 2D partial integro-differential equation (PIDE) arising in computational finance. A Wendland radial basis function (RBF) approach is used for the discretization of the spatial variables along with a linear interpolation technique for the integral operator. The resulting set of ordinary differential equations (ODEs) is tackled via a time integration method. A potential advantage of using RBFs is the small number of discrete equations that need to be solved. Computational experiments are presented to illustrate the performance of the contributed approach.
Colecciones a las que pertenece