Comparison of Selected Advanced Numerical Methods for Greeks Calculation of Vanilla Options

Kód výsledku v IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F46747885%3A24510%2F18%3A00008642" target="_blank" >RIV/46747885:24510/18:00008642 - isvavai.cz</a>

Výsledek na webu

<a href="http://iors.ir/journal/article-1-589-en.pdf" target="_blank" >http://iors.ir/journal/article-1-589-en.pdf</a>

DOI - Digital Object Identifier

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Jazyk výsledku

angličtina

Název v původním jazyce

Comparison of Selected Advanced Numerical Methods for Greeks Calculation of Vanilla Options

Popis výsledku v původním jazyce

Option valuation has been a challenging issue of financial engineering and optimization for a long time. The increasing complexity of market conditions requires utilization of advanced models that, commonly, do not lead to closed-form solutions. Development of novel numerical procedures, which prove to be efficient within various option valuation problems, is therefore worthwhile. Notwithstanding, such novel approaches should be tested as well, the most natural way being to assume simple plain vanilla options under the Black and Scholes model first; because of its simplicity the analytical solution is available and the convergence of novel numerical approaches can be analyzed easily. Here, we present the methodological concepts of two relatively modern numerical techniques, ie, discontinuous Galerkin and fuzzy transform approaches, and compare their performance with the standard finite difference scheme in the case of sensitivity calculation (a so-called Greeks) of plain vanilla option price under Black and Scholes model conditions. The results show some interesting properties of the proposed methods.

Název v anglickém jazyce

Comparison of Selected Advanced Numerical Methods for Greeks Calculation of Vanilla Options

Popis výsledku anglicky

Option valuation has been a challenging issue of financial engineering and optimization for a long time. The increasing complexity of market conditions requires utilization of advanced models that, commonly, do not lead to closed-form solutions. Development of novel numerical procedures, which prove to be efficient within various option valuation problems, is therefore worthwhile. Notwithstanding, such novel approaches should be tested as well, the most natural way being to assume simple plain vanilla options under the Black and Scholes model first; because of its simplicity the analytical solution is available and the convergence of novel numerical approaches can be analyzed easily. Here, we present the methodological concepts of two relatively modern numerical techniques, ie, discontinuous Galerkin and fuzzy transform approaches, and compare their performance with the standard finite difference scheme in the case of sensitivity calculation (a so-called Greeks) of plain vanilla option price under Black and Scholes model conditions. The results show some interesting properties of the proposed methods.

Druh

J_ost - Ostatní články v recenzovaných periodicích

CEP obor

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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

Iranian Journal of Operations Research (IJOR)

ISSN

2008-1189

e-ISSN

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Svazek periodika

9

Číslo periodika v rámci svazku

2

Stát vydavatele periodika

IR - Íránská islámská republika

Počet stran výsledku

14

Strana od-do

81-94

Kód UT WoS článku

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EID výsledku v databázi Scopus

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