Comparison of several modern numerical methods for option pricing

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F61989100%3A27510%2F18%3A10242149" target="_blank" >RIV/61989100:27510/18:10242149 - isvavai.cz</a>
Result on the web
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DOI - Digital Object Identifier
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Result language
angličtina
Original language name
Comparison of several modern numerical methods for option pricing
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 focus on numerical pricing of options. We first review well known approaches and subsequently we analyze three novel approaches, discontinuous Galerkin approach, wavelet approach and fuzzy transform technique. Extensive comparative study for various input data and pay-off functions is provided.
Czech name
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Czech description
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Publication year
2018
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Article name in the collection
Mathematical Methods in Economics : MME 2018 : 36th international conference : September 12-14, 2018, Jindřichův Hradec
ISBN
978-80-7378-371-6
ISSN
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e-ISSN
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Number of pages
4
Pages from-to
591-594
Publisher name
MATFYZPRESS
Place of publication
Praha
Event location
Jindřichův Hradec
Event date
Sep 12, 2018
Type of event by nationality
WRD - Celosvětová akce
UT code for WoS article
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