A numerical method for pricing discrete double barrier option by Legendre multiwavelet

DOI10.1016/J.CAM.2017.07.033MaRDI QIDQ2406310zbMATH OpenOpenAlexFDO

Authors Amirhossein Sobhani, Mariyan Milev

Publication date 27 September 2017

Published in Journal of Computational and Applied Mathematics (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1703.09129

zbMATH Keywords

Black-Scholes modeldouble and single barrier optionsLegendre multiwaveletoption pricing

Mathematics Subject Classification ID

Spectral, collocation and related methods for initial value and initial-boundary value problems involving PDEs (65M70) Numerical methods for wavelets (65T60) Derivative securities (option pricing, hedging, etc.) (91G20) Numerical methods (including Monte Carlo methods) (91G60)

Abstract: In this Article, a fast numerical numerical algorithm for pricing discrete double barrier option is presented. According to Black-Scholes model, the price of option in each monitoring date can be evaluated by a recursive formula upon the heat equation solution. These recursive solutions are approximated by using Legendre multiwavelets as orthonormal basis functions and expressed in operational matrix form. The most important feature of this method is that its CPU time is nearly invariant when monitoring dates increase. Besides, the rate of convergence of presented algorithm was obtained. The numerical results verify the validity and efficiency of the numerical method.

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• A numerical method for pricing discrete double barrier option by Chebyshev polynomials
• A Fourier-cosine method for pricing discretely monitored barrier options under stochastic volatility and double exponential jump
• Robust numerical algorithm to the European option with illiquid markets
• Numerical analysis of time fractional Black-Scholes European option pricing model arising in financial market
• Efficient and fast numerical method for pricing discrete double barrier option by projection method
• Romberg numerical method for partial differential Brownian model with time parameter for discrete barrier option
• Numerical algorithm for discrete barrier option pricing in a Black-Scholes model with stationary process
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• Numerical investigation of the time-fractional Black-Scholes equation with barrier choice of regulating European option
• Pricing European-type, early-exercise and discrete barrier options using an algorithm for the convolution of Legendre series
• A numerical method for pricing discrete double barrier option by Lagrange interpolation on Jacobi nodes
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