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

Kód výsledku v 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>

Výsledek na webu

<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

—

Jazyk výsledku

angličtina

Název v původním jazyce

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

Popis výsledku v původním jazyce

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.

Název v anglickém jazyce

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

Popis výsledku anglicky

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.

Druh

J_ost - Ostatní články v recenzovaných periodicích

CEP obor

—

OECD FORD obor

10102 - Applied mathematics

Projekt

<a href="/cs/project/GA16-09541S" target="_blank" >GA16-09541S: Robustní numerická schémata pro oceňování vybraných opcí za různých tržních podmínek</a><br>

Návaznosti

P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)

Rok uplatnění

2018

Kód důvěrnosti údajů

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Název periodika

Ekonomická revue – Central European Review of Economic Issues

ISSN

1212-3951

e-ISSN

—

Svazek periodika

21

Číslo periodika v rámci svazku

1

Stát vydavatele periodika

CZ - Česká republika

Počet stran výsledku

10

Strana od-do

21-30

Kód UT WoS článku

—

EID výsledku v databázi Scopus

—