A Note on Several Alternatives to Numerical Pricing of Options
The result's identifiers
Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F46747885%3A24510%2F17%3A00006306" target="_blank" >RIV/46747885:24510/17:00006306 - isvavai.cz</a>
Alternative codes found
RIV/61989100:27510/17:10240132
Result on the web
<a href="http://lef.tul.cz/" target="_blank" >http://lef.tul.cz/</a>
DOI - Digital Object Identifier
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Alternative languages
Result language
angličtina
Original language name
A Note on Several Alternatives to Numerical Pricing of Options
Original language description
Option pricing is a popular problem of financial mathematics and optimization due to the non-linearity in the option pay-off function and enormous sensitivity to the selection of underlying processes and input parameters. This aspect differentiates options from other derivatives. Since pricing and hedging of plain vanilla options under the conditions of Gaussian distribution (or a so called Black-Scholes model) is already well documented, it commonly serves as a benchmark for developing of new approaches and methods, which, in fact, aims on options with more complex payoffs (exotic options) and/or probability distributions that fit empirical observations about the market prices better, but for which no analytical formula is available. Obviously, being able to compare the results of the novel model with theoretically correct one is a crucial step of model testing. In this contribution we focuse on numerical pricing of options. We first review well known approaches of Monte Carlo simulation and Lattice models and subsequently we formulate a Black-Scholes-Merton Partial Differential Equation, which serves as a starting point for discretization via two novel approaches, discontinuous Galerkin approach and Fuzzy transform technique. Both approaches seems to be promising especially for complex processes and payoff functions.
Czech name
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Czech description
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Classification
Type
D - Article in proceedings
CEP classification
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OECD FORD branch
10102 - Applied mathematics
Result continuities
Project
<a href="/en/project/GA16-09541S" target="_blank" >GA16-09541S: Robust numerical schemes for pricing of selected options under various market conditions</a><br>
Continuities
P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)
Others
Publication year
2017
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů
Data specific for result type
Article name in the collection
13th International Conference on Liberec Economic Forum
ISBN
978-80-7494-349-2
ISSN
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e-ISSN
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Number of pages
9
Pages from-to
381-389
Publisher name
Technical University of Liberec
Place of publication
Liberec
Event location
Liberec
Event date
Jan 1, 2017
Type of event by nationality
EUR - Evropská akce
UT code for WoS article
000426486500043