| Title:
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Solution of option pricing equations using orthogonal polynomial expansion (English) |
| Author:
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Baustian, Falko |
| Author:
|
Filipová, Kateřina |
| Author:
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Pospíšil, Jan |
| Language:
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English |
| Journal:
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Applications of Mathematics |
| ISSN:
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0862-7940 (print) |
| ISSN:
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1572-9109 (online) |
| Volume:
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66 |
| Issue:
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4 |
| Year:
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2021 |
| Pages:
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553-582 |
| Summary lang:
|
English |
| . |
| Category:
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math |
| . |
| Summary:
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We study both analytic and numerical solutions of option pricing equations using systems of orthogonal polynomials. Using a Galerkin-based method, we solve the parabolic partial differential equation for the Black-Scholes model using Hermite polynomials and for the Heston model using Hermite and Laguerre polynomials. We compare the obtained solutions to existing semi-closed pricing formulas. Special attention is paid to the solution of the Heston model at the boundary with vanishing volatility. (English) |
| Keyword:
|
orthogonal polynomial expansion |
| Keyword:
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Hermite polynomial |
| Keyword:
|
Laguerre polynomial |
| Keyword:
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Heston model |
| Keyword:
|
option pricing |
| MSC:
|
33C45 |
| MSC:
|
65M60 |
| MSC:
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91G20 |
| MSC:
|
91G60 |
| idZBL:
|
07396167 |
| idMR:
|
MR4283303 |
| DOI:
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10.21136/AM.2021.0361-19 |
| . |
| Date available:
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2021-07-09T08:13:33Z |
| Last updated:
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2023-09-04 |
| Stable URL:
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http://hdl.handle.net/10338.dmlcz/148972 |
| . |
| Reference:
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