Review of several numerical approaches to sensitivity measurement of the Black-Scholes option prices

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F46747885%3A24510%2F19%3A00008638" target="_blank" >RIV/46747885:24510/19:00008638 - isvavai.cz</a>
Alternative codes found
RIV/61989100:27510/19:10245946
Result on the web
<a href="https://mme2019.ef.jcu.cz/files/conference_proceedings.pdf" target="_blank" >https://mme2019.ef.jcu.cz/files/conference_proceedings.pdf</a>
DOI - Digital Object Identifier
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Result language
angličtina
Original language name
Review of several numerical approaches to sensitivity measurement of the Black-Scholes option prices
Original language description
The efficient and robust numerical pricing of options plays an important role in financial engineering. Since the option price value depends on several underlying parameters, it is desired to know, apart from its value, also how the option price is sensitive to the changes in the underlying parameters, such as asset prices, volatilities, interest rates and times to maturity. These sensitivity measures are named after Greek letters and simply called the Greeks of an option. In this contribution, we provide a review and comparison of several approaches tested on the well-known benchmark of the Black-Scholes model for plain vanilla options. Specifically, we present three methodological concepts arising from finite differences, the discontinuous Galerkin approach and wavelet method. The potential of each of the approaches is demonstrated within a simple empirical study with an emphasis on the number of basis functions. From the practical point of view we evaluate the options at several underlying nodes and compare these values to the reference and analytical ones. Simultaneously we investigate the convergence property and orders of the schemes presented.
Czech name
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Czech description
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Project
Result was created during the realization of more than one project. More information in the Projects tab.
Continuities
P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)

Publication year
2019
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Article name in the collection
37TH INTERNATIONAL CONFERENCE MATHEMATICAL METHODS IN ECONOMICS (MME 2019)
ISBN
978-80-7394-760-6
ISSN
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e-ISSN
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Number of pages
6
Pages from-to
362-367
Publisher name
University of South Bohemia in České Budějovice
Place of publication
České Budějovice
Event location
České Budějovice
Event date
Jan 1, 2019
Type of event by nationality
EUR - Evropská akce
UT code for WoS article
000507570400060

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