DG Approach to Numerical Pricing of Local Volatility Basket Options
The result's identifiers
Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F61989100%3A27510%2F16%3A86099799" target="_blank" >RIV/61989100:27510/16:86099799 - isvavai.cz</a>
Alternative codes found
RIV/46747885:24510/16:00004013
Result on the web
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DOI - Digital Object Identifier
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Alternative languages
Result language
angličtina
Original language name
DG Approach to Numerical Pricing of Local Volatility Basket Options
Original language description
The problem of determining the fair price of an option is a delicate issue arising from the assumptions made under a market model and the evaluation of such option prices is often relied only on approximations obtained by numerical schemes. It is well known that commonly used Black-Scholes type models can not capture all real market features. Therefore, one way to make these models suitable for real world pricing issues is to relax some of the model assumptions. In this paper we present one of the basket option models that try to remain consistent with the volatility smile. These multi-factor local volatility models incorporate the volatility as a function of maturity and moneyness into the pricing procedure. The presented numerical approach arises from the concept of the discontinuous Galerkin method and enables better resolving of occurred special properties of solutions of such types of options. Finally, the resulting schemes are demonstrated on practical experiments with real data.
Czech name
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Czech description
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Classification
Type
D - Article in proceedings
CEP classification
BB - Applied statistics, operational research
OECD FORD branch
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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
2016
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů
Data specific for result type
Article name in the collection
34th International Conference Mathematical Methods in Economics (MME) : proceedings papers
ISBN
978-80-7494-296-9
ISSN
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e-ISSN
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Number of pages
6
Pages from-to
307-312
Publisher name
Technická univerzita Liberec
Place of publication
Liberec
Event location
Liberec
Event date
Sep 6, 2016
Type of event by nationality
EUR - Evropská akce
UT code for WoS article
000385239500053