Review of modern numerical methods for a simple vanilla option pricing problem

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F46747885%3A24510%2F18%3A00006307" target="_blank" >RIV/46747885:24510/18:00006307 - isvavai.cz</a>
Result on the web
<a href="http://www.er-cerei.cz/archive/article?volume=21&issue=1&paper=336" target="_blank" >http://www.er-cerei.cz/archive/article?volume=21&issue=1&paper=336</a>
DOI - Digital Object Identifier
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Result language
angličtina
Original language name
Review of modern numerical methods for a simple vanilla option pricing problem
Original language description
Option pricing is a very attractive issue of financial engineering and optimization. The problem of determining the fair price of an option arises from the assumptions made under a given financial market model. The increasing complexity of these market assumptions contributes to the popularity of the numerical treatment of option valuation. Therefore, the pricing and hedging of plain vanilla options under the Black–Scholes model usually serve as a benchmark for the development of new numerical pricing approaches and methods designed for advanced option pricing models. The objective of the paper is to present and compare the methodological con-cepts for the valuation of simple vanilla options using the relatively modern numerical techniques in this issue which arise from the discontinuous Galerkin method, the wavelet approach and the fuzzy transform technique. A theoretical comparison is accompanied by an empirical study based on the numerical verification of simple vanilla option prices. The resulting numerical schemes represent a particularly effective option pricing tool that enables some features of options that are dependent on the discretization of the computational domain as well as the order of the polynomial approximation to be captured better.
Czech name
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Czech description
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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)

Publication year
2018
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Name of the periodical
Ekonomická revue – Central European Review of Economic Issues
ISSN
1212-3951
e-ISSN
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Volume of the periodical
21
Issue of the periodical within the volume
1
Country of publishing house
CZ - CZECH REPUBLIC
Number of pages
10
Pages from-to
21-30
UT code for WoS article
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EID of the result in the Scopus database
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