A new radial basis functions method for pricing American options under Merton's jump-diffusion model

DOI10.1080/00207160.2012.690034zbMath1255.91409MaRDI QIDQ4903542

Muddun Bhuruth, Désiré Yannick Tangman, Aslam Aly El Faidal Saib

Publication date: 22 January 2013

Published in: International Journal of Computer Mathematics (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1080/00207160.2012.690034

zbMATH Keywords

Lévy processes; American options; exponential time integration; differential quadrature; jump-diffusion models; radial basis

Mathematics Subject Classification ID

91G60: Numerical methods (including Monte Carlo methods)

60G40: Stopping times; optimal stopping problems; gambling theory

91G20: Derivative securities (option pricing, hedging, etc.)

65M70: Spectral, collocation and related methods for initial value and initial-boundary value problems involving PDEs

Related Items

Pricing American options under jump-diffusion models using local weak form meshless techniques, A radial basis function based implicit-explicit method for option pricing under jump-diffusion models, An efficient numerical method for pricing option under jump diffusion model, Local weak form meshless techniques based on the radial point interpolation (RPI) method and local boundary integral equation (LBIE) method to evaluate European and American options, RBF-FD schemes for option valuation under models with price-dependent and stochastic volatility, A new method for evaluating options based on multiquadric RBF-FD method, An RBF-FD method for pricing American options under jump-diffusion models, A simple method for generalized sequential compound options pricing, A meshless method for Asian style options pricing under the Merton jump-diffusion model

Cites Work

• The Pricing of Options and Corporate Liabilities
• Jump-diffusion processes: volatility smile fitting and numerical methods for option pricing
• An iterative method for pricing American options under jump-diffusion models
• Multiquadrics - a scattered data approximation scheme with applications to computational fluid-dynamics. I: Surface approximations and partial derivative estimates
• Numerical pricing of options using high-order compact finite difference schemes
• Exponential time integration and Chebychev discretisation schemes for fast pricing of options
• A fast high-order finite difference algorithm for pricing American options
• Improved radial basis function methods for multi-dimensional option pricing
• Multi-dimensional option pricing using radial basis functions and the generalized Fourier transform
• Implicit-explicit numerical schemes for jump-diffusion processes
• Exponential time integration for fast finite element solutions of some financial engineering problems
• Comparison of methods for evaluating functions of a matrix exponential
• A multiquadric interpolation method for solving initial value problems
• Development of RBF-DQ method for derivative approximation and its application to simulate natural convection in concentric annuli
• Operator splitting methods for American option pricing.
• Numerical valuation of options with jumps in the underlying
• Adaptive radial basis function methods for time dependent partial differential equations
• Differential quadrature: A technique for the rapid solution of nonlinear partial differential equations
• Radial Basis Functions
• A Fast Numerical Method for the Black--Scholes Equation of American Options
• Robust numerical methods for contingent claims under jump diffusion processes
• Financial Modelling with Jump Processes
• A Fast and Accurate FFT-Based Method for Pricing Early-Exercise Options under Lévy Processes
• Option pricing when underlying stock returns are discontinuous
• A Finite Difference Scheme for Option Pricing in Jump Diffusion and Exponential Lévy Models