A Radial Basis Function Scheme for Option Pricing in Exponential Lévy Models
Article
Brummelhuis, Raymond and Chan, R. 2013. A Radial Basis Function Scheme for Option Pricing in Exponential Lévy Models. Applied Mathematical Finance. 21 (3), pp. 238-269. https://doi.org/10.1080/1350486X.2013.850902
Authors | Brummelhuis, Raymond and Chan, R. |
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Abstract | We use Radial Basis Function (RBF) interpolation to price options in exponential Lévy models by numerically solving the fundamental pricing PIDE (Partial integro-differential equations). Our RBF scheme can handle arbitrary singularities of the Lévy measure in 0 without introducing further approximations, making it simpler to implement than competing methods. In numerical experiments using processes from the CGMY-KoBoL class, the scheme is found to be second order convergent in the number of interpolation points, including for processes of unbounded variation. |
Journal | Applied Mathematical Finance |
Journal citation | 21 (3), pp. 238-269 |
ISSN | 1350-486X |
Year | 2013 |
Publisher | Taylor & Francis |
Accepted author manuscript | |
Digital Object Identifier (DOI) | https://doi.org/10.1080/1350486X.2013.850902 |
Web address (URL) | https://doi.org/10.1080/1350486X.2013.850902 |
Publication dates | |
Online | 17 Dec 2013 |
Publication process dates | |
Deposited | 01 Dec 2017 |
Accepted | 08 Aug 2013 |
Accepted | 08 Aug 2013 |
Copyright information | © 2013 Taylor & Francis. This is an Accepted Manuscript of an article published by Taylor & Francis in Applied Mathematical Finance on 17/12/2013, available online: http://www.tandfonline.com/10.1080/1350486X.2013.850902. |
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