Linear-time option pricing algorithms by combinatorics

DOI10.1016/J.CAMWA.2007.08.046MaRDI QIDQ2483085zbMATH OpenOpenAlexFDO

Authors Tian-Shyr Dai, Limin Liu, Yuh-Dauh Lyuu

Publication date 5 May 2008

Published in Computers & Mathematics with Applications (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1016/j.camwa.2007.08.046

zbMATH Keywords

combinatoricsexotic optionlatticeoptionpricing

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Numerical methods (including Monte Carlo methods) (91G60)

Review text

This paper deals with option price for the log-normal stock process. Since most options can not be evaluated analytically, they must be priced by numerical methods. The lattice model is used mainly, namely the time interval from initial to mature is divided into \(n\) times steps and stock price is discretelized at each time step. For efficient computation, the authors applied combinatorial technique and showed how their combinatorial algorithms improved the speed of calculations for various lattice models, when \(n\) is large. Numerical results are given.

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Cited in

(12)

• Computationally simple lattice methods for option and bond pricing
• Option strategies with linear programming
• Very fast algorithms for implied barriers and moving-barrier options pricing
• Spectral binomial tree: new algorithms for pricing barrier options
• scientific article; zbMATH DE number 2133128 (Why is no real title available?)
• High Performance Implementation of Binomial Option Pricing
• Ant Colony Optimization for Option Pricing
• Pricing ladder options with combinatorics
• scientific article; zbMATH DE number 1222805 (Why is no real title available?)
• Pricing complexity options
• Linear-time accurate lattice algorithms for tail conditional expectation
• An efficient and accurate lattice for pricing derivatives under a jump-diffusion process

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