Comparison of several modern numerical methods for option pricing

Kód výsledku v IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F46747885%3A24510%2F18%3A00009604" target="_blank" >RIV/46747885:24510/18:00009604 - isvavai.cz</a>

Výsledek na webu

<a href="https://mme2018.fm.vse.cz/wp-content/uploads/2018/09/MME2018-Electronic_proceedings.pdf" target="_blank" >https://mme2018.fm.vse.cz/wp-content/uploads/2018/09/MME2018-Electronic_proceedings.pdf</a>

DOI - Digital Object Identifier

—

Jazyk výsledku

angličtina

Název v původním jazyce

Comparison of several modern numerical methods for option pricing

Popis výsledku v původním jazyce

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.

Název v anglickém jazyce

Comparison of several modern numerical methods for option pricing

Popis výsledku anglicky

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.

Druh

D - Stať ve sborníku

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 statě ve sborníku

MATHEMATICAL

ISBN

978-80-7378-372-3

ISSN

—

e-ISSN

—

Počet stran výsledku

4

Strana od-do

591-594

Název nakladatele

MatfyzPress

Místo vydání

—

Místo konání akce

Jindřichův Hradec

Datum konání akce

1. 1. 2018

Typ akce podle státní příslušnosti

WRD - Celosvětová akce

Kód UT WoS článku

000507455300102